FlexMotors, Inc. manufactures a variety of electronic drills and grass cutters. Recently, it introduced a new line of handheld drills that generates much less noise and consumes much less energy, but carries a much higher price tag. The company is currently considering whether it should record $1.2 million of revenue upon shipment. Under the contract, FlexMotors is obligated to accept any products from the distributors if they are not sold within 6 months. The company is confident that the new model will sell, but is unable to accurately estimate returns, because it has never sold anything quite like it.
Required:
How much revenue should FlexMotors recognize upon shipment to distributors?

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The Answer of FlexMotors, Inc. manufactures a variety of electronic drills and grass cutters. Recently, it introduced a new line of handheld drills that generates much less noise and consumes much less energy, but carries a much higher price tag. The company is currently considering whether it should record $1.2 million of revenue upon shipment. Under the contract, FlexMotors is obligated to accept any products from the distributors if they are not sold within 6 months. The company is confident that the new model will sell, but is unable to accurately estimate returns, because it has never sold anything quite like it.
Required:
How much revenue should FlexMotors recognize upon shipment to distributors?