Soorya Manufacturing Makes Educational Toys That Are Sold to Retailers

question 23

Essay

Soorya Manufacturing makes educational toys that are sold to retailers on the following contractual terms: Each type of toy has a fixed wholesale price, is shipped F.O.B. shipping point, and payment is due 45 days after the shipment. The retailer may return a maximum of 45% of an order at the retailer's expense up to 6 months after delivery. Sales are made only to retailers that have a good credit rating.
Required:
a)Identify at least four different revenue recognition points that Soorya could use for its sales.
b)What revenue recognition criteria should Soorya use to determine when revenue should be recorded?

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Definitions:

Mean

The arithmetic average of a set of numbers, obtained by dividing the sum of these numbers by their quantity.

Z-statistic

A statistic used to determine the difference between an observed statistic and its hypothesized population parameter, measured in units of the standard deviation.

Two-tailed Test

A statistical test hypothesis that allows for the possibility of an effect in two directions, either greater than or less than.

Significant

In statistics, indicating that the results of an analysis are unlikely to have occurred purely by chance, at a specified level of probability.