Assume Sentinel Corp., an equipment distributor, sells a piece of machinery with a list price of $700,000 to Arch Inc. Arch Inc. will pay $725,000 in one year. Sentinel Corp. normally sells this type of equipment for 80% of list price. How much should be recorded as revenue?

Question

Quizplus · Accepted Answer

Revenue should be recorded at the amount that reflects the consideration to which the company expects to be entitled in exchange for those goods. Since Sentinel Corp. normally sells this type of equipment for 80% of the list price, the revenue recognized should be 80% of $700,000, which is $560,000.