On December 1, 2021, SuperTech Sold 100 Locks for Laptop

question 69

Multiple Choice

On December 1, 2021, SuperTech sold 100 locks for laptop computers at $50 each with a 90-day unconditional right of return. Since this is a new product for SuperTech, it has no past history regarding estimated returns. Which of the following is TRUE regarding SuperTech's December 31, 2021 financial statements?

• A)Sales of $5,000 should only be recognized in 2022 when the return privilege expires.
• B)Sales of $5,000 should be recognized in 2021 as long as there is a reserve for returns.
• C)Sales of $5,000 should be recognized in 2021, with future costs accrued as an estimated liability.
• D)Sales should only be recognized as the related cash is collected.

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Definitions:

Verrucae

Warts; small, circumscribed elevations of the skin formed by hypertrophy of the papillae.

Itch Mite

A small parasitic arachnid that can cause severe itching and skin irritation, such as the one responsible for scabies.

Folliculitis

A staphylococcal infection of a hair follicle.

Pustule

Small elevation of the skin filled with lymph or pus.