Question

Stossel Company sells 300 units for $200 each to Liberty Inc. for cash. Stossel allows Liberty to return any unused product within 30 days and receive a full refund. The cost of each product is $120. To determine the transaction price, Stossel decides that the approach that is most predictive of the amount of consideration to which it will be entitled is the most likely amount. Using the most likely amount, Stossel estimates that ten (10) units will be returned, the costs of recovering the units will be immaterial, and the returned units are expected to be resold at a profit. What amount of refund liability should Stossel record at the time of sale? $800 $ 0 $1,200 $2,000

Answer 1

Selling price per unit = $200

Estimated return = 10 units

Refund liability = Estimated return x Selling price per unit

= 10 x 200

= $2,000

Refund liability = $2,000

Fourth option is the correct option.

kindly give a positive rating if you are satisfied with the solution. do comment if you have any query, Thanks.