Question

On january 1, salow company enters into a contract to provide custom-made equipment to byhi corporation for $100,000. the contract terms allow cancellation without penalty by either party at any time prior to delivery of the goods. the contract specifies a delivery date of march 15 but the equipment was not delivered until april 10. the contract required full payment within 30 days after delivery. when should revenue be recognized for this contract? may 10 april 10 never, because it includes a termination agreement. march 15

Answer 1

Answer: I believe the answer is March 15th.

Answer 2

Answer: The correct answer is April 10.

Explanation: When a sale is made the revenue is going to be recognized when the product is delivered. In this case, Accounts Receivable will be debited and Sales will be credited on April 10. When the payment is received Cash will be debited and Accounts Receivable will be credited.