Corey's company "Promised Performance", sells appliances. Every item they sell comes with a four year extended warranty and same day delivery. Today he sold and delivered a refrigerator for $1,000. The refrigerator's normal warranty covers one year, so Corey's extended warranty will begin coverage in the second year and extend through the end of the fifth year. As his customers signed the contract to take delivery, Corey pointed out that other stores sell the refrigerator for $980 and their 4 year warranty for $220, so this is a real bargain. Corey told his accountant he wants to recognize $1,000 as soon as they deliver the refrigerator since he only ends up doing service work on about 10% of the machines. As his accountant, how much revenue would you recognize at the end of the day? Please explain your answer including providing numerical answers if you are suggesting an alternative to recognizing all today.

Answer rating: 100% (QA)

As Coreys accountant I would not recommend recognizing the full 1000 as revenue at the end of the da... View the full answer