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Unformatted text preview: Qinxin Yang P6-1 Case A The revenue has been earned is determined by when and what McDonald's actually sold. The sale of the coupon book does not equal that the earning process is complete with the delivery of the book to the customer. The correct point for revenue recognition in this case is when the cus- tomer uses the coupon to purchase products in McDonald or when the coupon expires and Mc- Donald's has no further obligation. Case B Under the usual circumstances, revenue should be recognized as cash is collected. However giv- en the risk of cash collection due to the fact that Quality Builders may default on the contract be- cause of prior actions and the down payment is really low, FASB #66 actually gives authoritative guidance concerning minimum down payments before revenue can be recorded on a land sale. (“For retail land sales, this Statement requires that the seller's receivables from the land sales be collectible and that the seller have no significant remaining obligations for construction or devel-...
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This note was uploaded on 12/01/2010 for the course UGBA 102A taught by Professor Udpa during the Summer '07 term at University of California, Berkeley.
- Summer '07