Assume Royal Palm Corp., an equipment distributor, sells a piece of machinery with a list price of $800,000 to Arch Inc.Arch Inc.will pay $850,000 in one year.Royal Palm Corp.normally sells this type of equipment for 90% of list price.How much should be recorded as revenue?

Question

Quizplus · Accepted Answer

Revenue should be recorded at the fair value of the consideration received or receivable. Since Royal Palm Corp. normally sells the equipment for 90% of the list price, the revenue should be recorded as 90% of $800,000, which is $720,000.