A company sells custom jewelry called Mike's Wholesale Jewelry. On June 15, they received an order for 500 pieces of jewelry. Mike's Wholesale Jewelry has a return policy that allows a customer to return merchandise for up to 30 days for a full refund with no questions asked. Mike's Wholesale Jewelry has a return rate around 5%. The jewelry sells for $50 each and costs $20 each.

Management at Mike's wants to know when they can recognize revenue since they heard there is a new way to recognize revenue in accounting.

Please use the FASB Codification guidance in your answer! Please write an accounting issues memo and an email to the client to answer the 2 questions below! 

 

1. Using the FASB Codification, what are Mike's management journal entries:

 (1) At the time of the order takes place?

 (2) At the time the customer received the order?

(3) When the 30 days return period has expired?

Answer rating: 100% (QA)

Accounting Issues Memo Subject Revenue Recognition for Mikes Wholesale Jewelry Dear Management Based on the FASB Codification revenue should be recognized when it is realized or realizable and earned ... View the full answer