E18-1 (Revenue Recognition on Book Sales with High Returns) Uddin Publishing Co. publishes college (a) Identify alternative revenue recognition criteria that Uddin could employ concerning textbook sales. fob shipping point - Since Revenue is recognized at the time its earned it could use the fob shipping point as its basis. Rate of Return - Since revenue is unknown until returns are processed, the cash collection basis could be used. FOB minus estimated returns - Since sales are considered revenue Uddin could recognize the revenue at the time it is earned minus the estimated 12% return. (b) Briefly discuss the reasoning for your answers in (a) above. GAAP states that revenue is recognized at the time it is earned therefore Uddin would need to be consitant in following these guidelines. Once the item is shipped it is considered sold. (c) In late July, Uddin shipped books invoiced at $15,000,000. Prepare the journal entry to record this event that best conforms to generally accepted accounting principles and your answer to part (b). Work Accounts Recievable $15,000,000.00 $15,000,000.00 Sales Revenue - Text Books $15,000,000.00 12% $1,800,000.00 Sales Returns - Text Books $1,800,000.00 Allowance for Sales Returns $1,800,000.00 (d) In October, $2 million of the invoiced July sales were returned according to the return policy, and
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