DB Inc Sells Goods on a Variety of Terms to Its

question 92

Multiple Choice

DB Inc. sells goods on a variety of terms to its customers, such as some sales on credit, some on consignment, and some on an installment basis. Which of the following revenue recognition methods is most applicable for a company like DB?

• A)Installment sales method, if the credit risk is low.
• B)Installment method, if credit risk is high.
• C)At time of shipment to the consignee, for consignment sales.
• D)At the point of sale, if credit risk is very high.

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Definitions:

Consolidated Net Income

The total net income of a parent company and its subsidiaries, after inter-company transactions have been eliminated.

Noncontrolling Interests

A portion of equity in a subsidiary not held by the parent company, representing the minority ownership's share of the subsidiary's net assets and income.

Net Income

The total profit of a company after subtracting all expenses from revenues, including taxes and operating expenses.

Domestic Corporations

Companies that are incorporated under the laws of a specific country and operate within that country.