Question

In: Accounting

LG sold 800 G7 phones in October for LG Electronics. As the demand was so high,...

LG sold 800 G7 phones in October for LG Electronics. As the demand was so high, LG can just deliver the G7 phones in November and it allowed LG Electronics for paying for them just in December and January. When will LG record the revenue from this sale?

A. October

B. November

C. December

D. December and January

Solutions

Expert Solution

Solution :- In the Given case , LG sold 800 G7 phones in October but As the demand was so high, LG can just deliver the G7 phones in November. LG allowed LG Electronics for paying for them in December and January. In this case , the goods (G 7Phones) are delivered in November while the payment is received in December and January.

In case of sale of Goods, Revenue should be recognised when Risks and rewards have been transferred From the seller to the buyer and when the seller has no control over the goods and the collection of payment is assured. In the Given case , Due to High demand , the goods (G7 Phone ) has been delivered in November , therefore Risks and rewards have been transferred From LG to the LG Electronics at the time of delivery of goods i.e in November  and now the seller has no control over the goods while the payment will be received in December and January.

Therefore LG will recognize the revenue in November because Risks and rewards have been transferred From LG to the LG Electronics at the time of delivery of goods i.e in November.

Answer : B November


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