If a Company Sells Its Product but Gives the Buyer

question 39

Multiple Choice

If a company sells its product but gives the buyer the right to return the product, revenue from the sales transaction should be recognized at the time of sale under the earnings approach if

• A)the market for returnable goods is untested.
• B)the amount of goods returned is high.
• C)there is a transfer of the risks and rewards of ownership.
• D)the amount of future returns can be reasonably estimated.

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Definitions:

Liability

A financial obligation or responsibility that an individual or entity owes, which may result in the future sacrifice of economic benefits.

Control Resources

Control Resources involves the strategic management and allocation of a company’s assets, human resources, and capital to effectively support operations, maximize efficiency, and achieve organizational goals.

Sunk Costs

Past expenditures that cannot be recovered and should not affect current or future business decisions.

Other People's Resources (OPR)

refers to the strategic use of resources owned by others, such as time, money, or knowledge, to achieve one's objectives.