Revenue Recogniton Conditions
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The FASB concluded that if a company sells its product but gives the buyer the right to return the product, revenue from the sales transaction shall be recognized at the time of sale only if all of six conditions have been met.
Which of the following is NOT one of these six conditions?
A) The amount of future returns can be reasonably estimated.
B) The seller's price is substantially fixed or determinable at time of sale.
C) The buyer's obligation to the seller would not be changed in the event of theft or damage of the product.
D) The buyer is obligated to pay the seller upon resale of the product.
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Solution Summary
The solution discusses the proper response with references to FASB information about the conditions necessary for recognition of sales.
Solution Preview
You are correct with answer D, and the reason you are right is that number 5 of the six conditions states ...
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