Chapter 9

17.1 In the following examples (see pages 648–9), indicate whether it was proper for X
to record the particular amount of revenue according to accepted recognition
principles (accrual system). Your answer should be ‘yes’ or ‘no’.
1. No. The common carrier is the agent of X and it still has possession of the goods. There
is no sale, because delivery has not been made, not until the point of destination.
2. Yes. For the sake of convenience to the customer, delivery has not been made. In such
a case, delivery is not insisted upon in order to record revenue. If X wished to, X could
wait until delivery to record the sale.
3. No. Since Y’s credit rating is good, there is no basis for belief that collectability is very
uncertain; therefore, X should not use the instalment method.
4. No. There is also accrued interest for the four months from September 1 to December
31.
5. No. X should have recorded the $600 as revenue last year when the repair service was
rendered.
6. No. The consignee is, in effect, an agent of X. Until the consignee sells the goods, there
is no sale.
7. No. Until the study is completed, there is no sale of services. The completion of the
study is necessary to the meaningfulness of the study. The last act must be performed
before there is recognition of revenue.