A Company Makes a $200 Sale on Account

question 57

Multiple Choice

A company makes a $200 sale on account. It later collects the $200 in cash. Under the accrual method of accounting, revenue is recognized:

• A)when the cash is collected.
• B)when the sale is made.
• C)either when the cash is received or the sale is made.
• D)at a time that cannot be determined from the facts.

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Definitions:

Prevention Cost

Costs incurred to prevent the production of defective goods or the provision of low-quality services.

Appraisal Cost

Expenditures related to the detection and prevention of defective products or services before delivery to customers.

Internal Failure

Costs incurred due to defects in goods or services before they are delivered to the customer, including scrap and rework expenses.

External Failure

Costs incurred when a product or service fails after being delivered to the customer, leading to returns, repairs, or recalls.