Related questions with answers

Question

Assume McDonald’s enters into a contract to sell Billy Bear dolls for Toys4U Stores. Based on the contract, McDonald’s displays the dolls in selected stores. Toys4U is not paid until the dolls have been sold by McDonald’s, and unsold dolls are returned to Toys4U. Required: Determine whether Toys4U has satisfied its performance obligation when it delivers the dolls to McDonald’s. Explain your answer.

Solutions

Verified
Step 1
1 of 2

No, although McDonald's does have physical possession of the asset, (1) there is no obligation to pay Toys4U, (2) legal title has to pass, (3) risks and rewards of ownership has not transferred. Toys4U still retains ownership of the goods.

With regard to recognizing revenue upon delivery or revenue recognition at a single point in time, the performance obligation is satisfied when control has been transferred. Since it has yet to be transferred in this case, Toys4U has not satisfied its performance obligation when it delivers the dolls. No revenue should be recognized upon delivery. Refer to page 238 for more details.

Create an account to view solutions

By signing up, you accept Quizlet's Terms of Service and Privacy Policy
Continue with GoogleContinue with Facebook

Create an account to view solutions

By signing up, you accept Quizlet's Terms of Service and Privacy Policy
Continue with GoogleContinue with Facebook

Recommended textbook solutions

Glencoe Accounting: First Year Course 1st Edition by Glencoe McGraw-Hill

Glencoe Accounting: First Year Course

1st EditionISBN: 9780078688294Glencoe McGraw-Hill
548 solutions
Intermediate Accounting 9th Edition by James F. Sepe, J. David Spiceland, Mark W. Nelson, Wayne Thomas

Intermediate Accounting

9th EditionISBN: 9781259722660James F. Sepe, J. David Spiceland, Mark W. Nelson, Wayne Thomas
2,040 solutions
Financial Accounting 4th Edition by Don Herrmann, J. David Spiceland, Wayne Thomas

Financial Accounting

4th EditionISBN: 9781259730948 (4 more)Don Herrmann, J. David Spiceland, Wayne Thomas
1,097 solutions
Century 21 Accounting: General Journal 11th Edition by Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman

Century 21 Accounting: General Journal

11th EditionISBN: 9781337623124Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman
1,012 solutions

More related questions