Gunk Goblin Sells Vacuums and Just Launched a Policy Where

question 70

Multiple Choice

Gunk Goblin sells vacuums and just launched a policy where customers have the right to return a vacuum during a three-year period following purchase. Gunk management has no experience under this sort of policy, and does not believe it can accurately estimate returns. What is the longest period of time that Gunk may have to wait before recognizing gross profit associated with one of these sales?

• A)No time delay, recognize gross profit upon delivery.
• B)Gunk should recognize gross profit as cash is received under the installment method.
• C)Gunk should defer gross until costs are recovered under the cost recovery method.
• D)Three years, after the right of return has expired.If returns can't be estimated, revenue should be deferred until they can or until the return right expires.

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