A furniture store sells a large-screen TV to a York student for $875. At the time of
Question:
A furniture store sells a large-screen TV to a York student for $875. At the time of purchase, the store was having a sale whereby the student did not have to make a payment for 18 months, at which time the full amount would be due. The student placed the order for the TV on December 15, 2019, at which time a contract was signed. At the same time, the student purchased an extended warranty for $125. The warranty provides 100% repair or replacement service for three years beginning one year from the date of purchase. The student’s mother co-signed the agreement guaranteeing payment in the event the student did not pay. The mother’s credit was checked and found to be ok. The TV was delivered on January 8, 2020. Payment is due June 15, 2021.
Required:
How should the store recognize the revenue for this transaction? Assume that the store follows ASPE.
Valuation The Art and Science of Corporate Investment Decisions
ISBN: 978-0133479522
3rd edition
Authors: Sheridan Titman, John D. Martin