Question

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

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 if a. payment was made by check, the selling price is less than the normal price, or the buyer has the right to return the product without a reasonable estimate of future returns.

Step-by-step explanation:

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

1. Payment was made by check.
2. The selling price is less than the normal selling price.
3. The buyer has a right to return the product and the amount of future returns cannot be reasonably estimated.

In all these cases, there is uncertainty and potential risk involved which makes it inappropriate to recognize revenue immediately. Recognizing revenue in these situations could overstate the seller's financial performance and mislead stakeholders.