Flex Bandage Inc. manufactures surgical wraps which it distributes to hospitals and clinics around the country. Flex Bandage uses primarily trade accounts when dealing with its customers and bases its accounts receivable valuation at year end on an aging schedule and prior history of overall collections.
a. When should recognize revenue from its sales transactions?
b. If Flex Bandage is a publicly owned company what is a potential problem auditors need to consider for revenue recognition?
c. How would your answer to part b. change if FlexBandage were a privately owned company?