Under the earnings approach, a sale should not be recognized as revenue by the seller at the time of sale if
A)payment was made by cheque.
B)the selling price is less than the normal selling price.
C)the buyer has a right to return the product and the amount of future returns cannot be reasonably estimated.
D)none of these.

Question

Quizplus · Accepted Answer

If the buyer has the right to return the product and the amount of future returns cannot be reasonably estimated, then the seller cannot recognize the sale as revenue at the time of sale because there is still uncertainty about the actual revenue that will be earned. This is because the seller may have to provide a refund if the product is returned, which would reduce the actual revenue earned from the sale.

Under the Earnings Approach, a Sale Should Not Be Recognized