If the Right of Return Exists, Which of the Criteria

question 26

Multiple Choice

If the right of return exists, which of the criteria below would suggest that the revenue recognition be deferred?

• A)The seller does not have an obligation for future sales assistance.
• B)The buyer's obligation to the seller would be changed by theft or damage to the product.
• C)The amount of future returns can be reasonably estimated.
• D)The buyer has economic substance apart from the seller.

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Definitions:

Journal

A comprehensive record of all financial transactions of a business, listed in chronological order.

Trial Balance

A bookkeeping worksheet in which the balances of all ledgers are compiled into debit and credit columns to ensure a company's bookkeeping system is mathematically correct.

Transactions

Financial activities that involve the exchange of assets, services, or liabilities between two parties.

Ledger

An accounting book or computer file for recording and totaling economic transactions measured in terms of a monetary unit and categorized by account type.