A city transit authority issues 200,000 monthly passes at $80 each for sale at various retailers. Retailers act as consignees for these passes. Identify why the transit authority cannot recognize revenue at time of distribution.
A)The retailers have not taken physical possession of the asset.
B)A contract has not been entered into.
C)The transaction price is not known.
D)The retailers do not bear the significant risks and rewards of ownership.

Question

Quizplus · Accepted Answer

The retailers do not bear the significant risks and rewards of ownership, which means the transit authority still owns the passes until they are sold to individual customers. Therefore, revenue cannot be recognized at the time of distribution to the retailers.

A City Transit Authority Issues 200,000 Monthly Passes at $80