On July 1, 2011, Panther, Inc.sold goods to Smart Company for €1,800,000 in exchange for a 4-year zero-interest-bearing note in the face amount of €2,832,326.The goods have an inventory cost on Panther's books of €1,180,000.Later in the month, Smart Company expects to be able to re-sell the goods for €2,040,000.How much revenue should Panther, Inc.recognize on its books on July 1, 2011?

Question

Quizplus · Accepted Answer

Revenue should be recognized at the amount of consideration received or to be received, which in this case is €1,800,000. The expected resale price by Smart Company is not relevant to the revenue recognition at the time of sale. The face amount of the note is also not relevant as it includes the time value of money. Finally, the cost of the goods is not relevant to the revenue recognition as it only represents the expense incurred by Panther to obtain the revenue.