Boomerang Computer Company sells computers with an unconditional right to return the computer if the customer is not satisfied. Boomerang has a long history selling these computers under this returns policy and can provide precise estimates of the amount of returns associated with each sale. Boomerang most likely should recognize revenue:
A) When Boomerang delivers a computer to a customer, ignoring potential returns.
B) When Boomerang delivers a computer to a customer, in an amount that is reduced by the expected returns.
C) When Boomerang receives cash from the customer.
D) When a customer returns a computer.

Question

Quizplus · Accepted Answer

Boomerang can estimate returns reliably enough for the constraint on recognizing variable consideration to not apply, so Boomerang would adjust the transaction price for expected returns and recognize revenue in that amount upon delivery.

Boomerang Computer Company Sells Computers with an Unconditional Right to Return