TrueTech Industries sells the Tri-Box, a gaming console that allows users to play video games individually or
Question:
December 20, 2017: CompStores orders 1,000 Tri-Boxes at a price of $240 each, promising payment within 30 days after delivery. TrueTech has received the order but hasn't fulfilled its performance obligation to deliver Tri-Boxes. In light of this and other indicators, TrueTech's judgment is that control has not been transferred and revenue should not be recognized.
January 1, 2018: TrueTech delivers 1,000 Tri-Boxes to CompStores, and the title to the Tri-Boxes transfers to CompStores. TrueTech has delivered the Tri-Boxes, and CompStores has accepted delivery, so CompStores has physical possession, legal title, the risks and rewards of ownership, and an obligation to pay TrueTech. TrueTech's performance obligation has been satisfied, so TrueTech can recognize revenue and a related account receivable of $240,000.* ($240 x 1000 units)
January 25, 2018: TrueTech receives $240,000 from CompStores. This transaction does not affect revenue. We recognize revenue when performance obligations are satisfied, not when cash is received. TrueTech simply records collection of the account receivable.
Strategic Management Text and Cases
ISBN: 978-1259900457
9th edition
Authors: Gregory G Dess Dr., Gerry McNamara, Alan Eisner