Question

G. Revenue Recognition Concept: Mary signed up and paid $1200 for a 6 month ceramics course on June 1st with Choplet Ceramics. As of August Ist, Choplets accounting records would indicate how much revenue H. Right of Return Concept: Boomerang Computer Company sells computers with an unconditional right to return the computer if the customer is not satisfied. Boomerang has a long history selling these computers under this returns policy and can provide precise estimates of the amount of returns associated with each sale. Boomerang most likely should recognize revenue:

Answer 1

G) : Revenue Recognition Concept :

As of Aug 1st Choplet's accounting records would indicate revenue

Recognize revenue over the period of instruction on Straight Line Method basis :

Mary signed up and paid $1200 for 6 months ceramic course on June 1st

Monthly amount is = $1200/6=$200

As of Aug 1st Revenue = $200*2=$400

H) :Right of Return Concept :

Boomerang most likely should recognize revenue :

In case of retail sales, if the entity offers a guarantee of 'money back if not completely satisfied' - It may be appropriate to recognise revenue for full invoice amount at the time of sale of goods & the Boomerang can create an appropriate provision for expected goods return based on the previous experience.