A sale should not be recognized as revenue by the seller at the time of sale if
A) payment was made by check.
B) the selling price is less than the normal selling price.
C) the buyer has a right to return the product and the amount of future returns cannot be reasonably estimated.
D) None of these answers are correct.

Question

Quizplus · Accepted Answer

If the buyer has a right to return the product and the amount of future returns cannot be reasonably estimated, the revenue should not be recognized at the time of the sale. This is because there is uncertainty about the eventual amount and timing of cash flows related to the transaction. Choices A and B are not valid reasons for withholding recognition of revenue. Choice D is incorrect because there is a valid reason (C) for withholding recognition of revenue in certain situations.

A Sale Should Not Be Recognized as Revenue by the Seller