GAAP specifies that for a seller to record revenue at time of sale when right of return exists the following conditions must be met except:
A)The seller's price to the buyer is substantially fixed or determinable at the date of sale.
B)The buyer has paid the seller,or the buyer is obligated to pay the seller and the obligation is not contingent on resale of the product.
C)The buyer's obligation to the seller does not change in the event of theft or physical destruction or damage of the product.
D)The buyer is a special purpose entity established by the seller for the sole purpose of buying and reselling the seller's product.

Question

Quizplus · Accepted Answer

The other three conditions listed (fixed or determinable price, payment obligation, and non-changeable obligation) are all required for revenue recognition even when a right of return exists. The exception is when the buyer is a special purpose entity established solely to buy and resell the seller's product, in which case the seller may recognize revenue at the time of sale regardless of the right of return.

GAAP Specifies That for a Seller to Record Revenue at Time