Final answer:
Revenue should be recognized when earned and realizable, typically when goods are delivered and the sales agreement is fulfilled. Dowell should not recognize the $50,000 revenue in 2018 because the delivery occurred in January 2019, making it part of the earnings process completion.
Step-by-step explanation:
The student's question relates to revenue recognition under the accounting principle of accrual accounting. According to the revenue recognition principle, revenue should be recognized when it is earned and realizable, regardless of when the cash is actually received. Considering Dowell Fishing Supply, Inc. sold Dowell Rods on December 15, 2018, but held the inventory until January 12, 2019, the key factor here is whether the delivery of goods is a necessary condition for the sale to be considered complete.
If the delivery is necessary for the sale to be complete and Dowell assured Bassadrome that it would deliver the product 'sooner if necessary,' suggesting that the delivery is part of the sales agreement, Dowell should not recognize revenue in 2018. Instead, the revenue of $50,000 for the sale to Bassadrome would be recognized when the goods are actually delivered to Bassadrome in January 2019, given that this is when the earnings process is deemed to be complete and the risks and rewards are transferred to the buyer.