Question is an online retailer of electronics, music, books, DVDs, and a variety of other consumer goods. All sales are made on the basis of FOB Destination Prepaid; the shipping costs are paid by the customer. During the last week of the year, had a large year-end sale of all merchandise on the site. The company provided a guarantee that all orders would be shipped by the end of the year. During that week had sales orders totaling $5.8 million, which was equal to 23% of total sales for the year before the sale. As the company promised, all the orders were shipped on December 31. At this time, all the money was collected and no products for these orders were in the control of the company. The customers received their orders within 5 days of shipment.
Use the criteria in FASB Statement of Financial Accounting Concepts No.5 and indicate when and/or how the client should recognize the revenue. Assume the company has a calendar year-end. Explain your answer. Additionally, what controls are in place and how would you audit these controls?

  • CreatedJanuary 21, 2015
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