Costco Wholesale Corp. has always had a generous return policy but adopted a new policy requiring that certain electronics be returned within 90 days of their purchase. The reason for the change was that returned electronics cut an estimated 8¢ per share off Costco’s earnings per share.

Because Costco expects significant returns, what are the implications for revenue recognition? In a paragraph, explain what should Costco do at the end of the year?

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