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This post addresses Deere revenue recognition.

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Summary of study question:

Deere recognizes income at the time of shipment to dealer. Provisions are made at the time of the sale. A time lag exists between recording sales and the dealer sells equipment to the customers. Deere uses the installment method for tax reporting. Deere provides financing services. Accounts and notes receivable appear net of unearned finance income. Deere recognizes this income as finance revenue over the period that the dealer and customer notes are outstanding.

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Recap: Deere recognizes income at the time of shipment to dealer. Provisions are made at the time of the sale. A time lag exists between recording sales and the dealer sells equipment to the customers. Deere uses the installment method for tax reporting. Deere provides financing services. Accounts and notes receivable appear net of unearned finance income. Deere recognizes this income as finance revenue over the period that the dealer and customer notes are outstanding.

(A) Deere is justified in their timing of revenue recognition for equipment sales because the criteria for revenue recognition are fulfilled at the point of shipment to the dealer. The provisions that are in-place by Deere cover returns, allowances, incentives, and uncollectible accounts. Deere is therefore making provisions based on estimated amounts. The timing at the point of the equipment shipment is correct. The timing of the sale would not be held in respect to the timing difference ...

Solution Summary

The solution provides a detailed discussion for each part of the problem involving Deere and their recognition of revenue.

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