Question

Identify the proper point to recognize revenue for each of the following transactions.

a. Napoleon Industries sells and delivers a machine in January with terms of no payment due until six months later.

Answer 1

Revenue for the transaction should be recognized in January when the machine is sold and delivered.

Step-by-step explanation:

The proper point to recognize revenue for this transaction is in January when the machine is sold and delivered. While the payment is not due until six months later, revenue is recognized when the seller has fulfilled its obligations and the earnings process is complete. In this case, the seller has provided the machine to the buyer, and therefore, revenue should be recognized in January.