Santos Company Allows a Liberal Return Privilege on Its Normal

question 9

Multiple Choice

Santos Company allows a liberal return privilege on its normal sales.Products purchased by customers may be returned within 90 days of purchase if in resalable condition,for a full refund.The following information relates to 2014:

Assuming that all criteria of SFAS No.48,"Revenue Recognition When Right of Return Exists," are not met,what is the gross margin to be reported by the company in 2014?

• A)$4,000
• B)$10,000
• C)$40,000
• D)$2,000

---

Definitions:

Stated Value

A specified value assigned to no-par-value stock by the company's board of directors.

General Journal

A comprehensive accounting record where all financial transactions are initially recorded, using a double-entry accounting system.

Nonparticipating

typically refers to an insurance or investment product feature where the holder does not have the right to receive dividends or bonuses generated from the underlying pool of assets.

Par Value

The nominal or face value of a stock or bond, as stated by the issuing company, which may bear no relation to its market value.