Assume a contract for the sale of goods specifies that payment is to be made four months after delivery of a product. The seller is likely to do which of the following, with respect to the time value of money over the life of the contract?
A) Recognize interest expense.
B) Recognize interest revenue.
C) Recognize additional cost of goods sold.
D) Ignore the time value of money.

Question

Quizplus · Accepted Answer

If the payment is made nine months after delivery, the seller is essentially loaning money to the buyer. However, since the payment is within one year of delivery, the financing component of the contract is viewed as insignificant, so the time value of money is ignored.

Assume a Contract for the Sale of Goods Specifies That