On May 27,Ace Electronics ordered merchandise from Elmo Company.Elmo shipped the merchandise to Ace on May 31,FOB shipping point.The merchandise arrived at Ace's warehouse on June 2.Ace paid for the merchandise on July 1.When should Elmo recognize revenue?

Question

Quizplus · Accepted Answer

Elmo should recognize revenue on May 31 when the merchandise was shipped FOB shipping point. Ownership and risk of loss transferred to Ace at that point, and Elmo fulfilled its obligations under the sales contract. The subsequent arrival of the merchandise at Ace's warehouse on June 2 and payment on July 1 are not relevant to the revenue recognition.

On May 27,Ace Electronics Ordered Merchandise from Elmo Company