Montreal Machinery (MM) produces and sells computer-controlled machines that monitor and control the temperature and humidity in the production of candies.After they deliver and install the product they spend a month adjusting it to the customer's needs and environment and training their staff.They also provide a two-year warranty on the machines.When would be an appropriate time for MM to recognize the revenue from the sale of a machine?

Question

Quizplus · Accepted Answer

Revenue recognition should occur when the performance obligations under the contract are satisfied, which in this case includes delivery, installation, adjustment to the customer's needs, and staff training. Estimating the cost of the warranty allows MM to recognize revenue after these services are completed, as the warranty is a separate performance obligation that can be accounted for separately.

Montreal Machinery (MM) Produces and Sells Computer-Controlled Machines That Monitor