Question

QUESTION 29 Jada Morgan recently purchased on lay-a-way a big screen television from Walmart. Jada paid $200 as a cash deposit on the television. The television cost Walmart $2,000 and has a total retail price of $3,500. Walmart has set the television aside pending the payment by Jada of the balance owed. Walmart require its customers to enter into an installment note or other fixed payment agreement when the initial deposit is received. Merchandise on layaway generally is not released to the customer until the customer pays th full purchase price. If the customer fails to pay the remaining purchase price, the customer forfeits his or her cash deposit. In the event the merchandise is lost, damaged or destroyed, Walmart either must refund the cash deposit or provide replacement merchandise. When should Walmart recognize the revenue from the sale to Jada? Justify your answer.

Answer 1

As per the accrual basis of accounting walmart will record revenue when the full payment will be received and the merchandise will be delivered to the customer, until the delivery is made the deposit amount will be treated as unearned revenue or advance from customer.