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:

Question

Quizplus · Accepted Answer

Boomerang should recognize revenue when the computer is delivered to the customer because they can accurately estimate the amount of returns associated with each sale and can reasonably predict the amount of revenue that is collectible. The fact that there is an unconditional right to return the computer does not negate the fact that revenue has been earned at the point of delivery. This is in accordance with the revenue recognition principle, which requires that revenue be recognized when the company has substantially completed its performance obligations, which in this case is the delivery of the computer.

Boomerang Computer Company Sells Computers with an Unconditional Right to Return