Review the revenue recognition practices of the following

companies and #974

Review the revenue recognition practices of the following companies, and indicate at what point
in time revenue should be recognized in each of these independent cases. Explain your
answer.Case A. The sales representatives of Computec Corporation are under intense pressure
to achieve very high sales levels. To achieve their specific objectives, the sales representatives
ask customers to order computer equipment in advance, with payment to be made later. In
many cases, the company records sales on the basis of customers’ orders, even though the
ordered equipment may not have been manufactured yet.Case B. Scenic Trails Inc. is a
campground operator that sells annual memberships to campers. Members are allowed to pay
the annual membership fees over a period of six months. The company records revenue from
membership fees as soon as a new member signs the membership agreement. Members are
allowed 10 days to cancel their memberships, and many members cancel their memberships
within days of signing.Case C. Educational Toys Inc. sells a wide variety of toys to distributors
and allows them to return unsold merchandise within a period of three months. The company’s
policy encourages distributors to buy products and keep them for three months, knowing they
could return any unsold merchandise during this period. The company recognizes revenue as
soon as it delivers its products to distributors.View Solution:
Review the revenue recognition practices of the following companies and

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