Chen Alterations Company Follows the Revenue Recognition Principle

question 160

Multiple Choice

Chen Alterations Company follows the revenue recognition principle. Lynn Chen altered a tuxedo on April 30. The customer picks up the tuxedo on May 1 and mails the payment to Chen on May 5. Chen receives the check in the mail on May 6. When was Chen's performance obligation satisfied?

• A) April 30
• B) May 1
• C) May 5
• D) May 6

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Definitions:

Readily Observable

Pertains to information or data that is easily seen, recognized, or understood through minimal effort, often used in finance and economics.

Avoidable Interest

Interest cost that a company can avoid if it does not undertake a project or an investment; typically considered in capital budgeting to assess potential savings.

Weighted Average

Weighted average is a calculation method where different values are given different levels of importance or weight, often used in inventory valuation or to average grades.

Economic Sacrifices Approach

A method in accounting that focuses on recognizing and measuring the sacrifices or costs that a company incurs in the process of generating revenue.