Under Which One of the Following Situations Can a Company

question 204

Multiple Choice

Under which one of the following situations can a company recognize revenue under Generally Accepted Accounting Principles?

• A) A customer signs a contract to purchase goods to be delivered in two weeks.
• B) A company completes production of a customer order to be delivered in two weeks.
• C) A company ships the goods for which it received a deposit two weeks ago.
• D) A company receives a cash deposit from a customer to deliver goods in two weeks.
• E) A company purchased raw materials to complete production of a customer order.

---

Definitions:

Merchandise

Goods that are bought and sold in the course of business, usually in a retail environment.

Delivery Expense

The costs incurred by a business to transport its goods to the customer, often treated as a direct or indirect expense depending on the nature of the expense allocation.

Expense Account

An accounting account that tracks money spent or costs incurred in a business entity's operation.

Perpetual Inventory System

An inventory management accounting method that instantly documents transactions of buying or selling inventory via computerized point-of-sale systems and enterprise asset management applications.