SilverStone Inc

question 50

Multiple Choice

SilverStone Inc.supplies emission systems worth $100,000 to Horizon Enterprises.As per the terms of sale contract, SilverStone takes back all unused emission systems.Horizon estimates that 5% of the emission systems will be returned.Under IAS 18, only four out of the five conditions for recognizing revenue from the sale of goods are met as economic benefits of 95% of sale will flow to SilverStone.How much revenue should be recognized by SilverStone Inc.?

• A)The recognition of the entire sale must be deferred until the fifth condition has been met.
• B)$75,000 of the sales price can be currently recognized as revenue and $25,000 will be treated as a deferred revenue (liability).
• C)The entire $100,000 sales price can be currently recognized since most of the conditions have been met.
• D)None of the above represents a proper treatment of this sale.

---

Definitions:

Continental Crust

The thick, buoyant part of the Earth's crust that forms the continents; it is generally older and more complex than oceanic crust.

Granite

A common and widely occurring type of intrusive, felsic, igneous rock, characterized by its granular texture.

Abundant Elements

Chemical elements that occur in large quantities in Earth's crust, atmosphere, or oceans, such as oxygen, silicon, and aluminum.

Calcium Carbonate

A chemical compound with the formula CaCO3, commonly found in rocks as the minerals calcite and aragonite and is the main component of pearls, the shells of marine organisms, snails, and eggs.