Question

A sale should not be recognized as revenue by the seller at the time of sale if:

Select one:
A. payment was made by check
B. the selling price is less than the normal selling price
C. the buyer has a right to return the product and the amount of future returns cannot be reasonably estimated
D. none of these.

Answer 1

A sale should not be recognized as revenue by the seller at the time of sale if the buyer has a right to return the product and the future returns cannot be reasonably estimated.

Step-by-step explanation:

According to generally accepted accounting principles (GAAP), a sale should not be recognized as revenue by the seller at the time of sale if the buyer has a right to return the product and the amount of future returns cannot be reasonably estimated.

This is because when the buyer has the right to return the product, there is an uncertainty regarding the final transaction value and it is difficult for the seller to accurately determine the revenue earned.

Example: If a bookstore sells books with a return policy, the revenue from those sales should not be recognized until the return period has expired, and the likelihood of returns can be reasonably estimated.