Question

Home Depot sells a washer and dryer for $1,600 on April 1st. After successful completion of a credit check, the customer makes a down payment of $280 cash and agrees to pay an additional $110 per month for the next 12 months. The washer and dryer are delivered and installed on April 6th. Are the revenue recognition criteria met or not met? Why or why not?

Each response should be about one paragraph long, describing the justification for your decision.

Answer 1

YES, as per accounting standards the revenue recognition criteria was met.

explanation for the above given statement is as follows

1. here there is no factor influence for not to recognize income at the time of sale

2. here there is no condition that if the customer was not satisfied the entire amount to be given back or no cancellation of contract. so we can recognize income then and there.

3. as the sale was done on April 1st but the valid sale was came on April 6th then the income should be recognized on April 6th only.

4. If we consider all the installments. all the amounts to be received also were in the same accounting year. so, the income can be recognized on April 6th

5. income recognition pattern is as follows:-

April 6 ------$280

may 6 -------$110

june 6-------$110

july 6--------$110

august 6----$110

september 6-$110

october 6 -----$110

november 6 ---$110

december 6 -----$110

january 6 --------$110

february 6 --------$110

march 6 ----------$110

april 6-----------$110

total amount we get that is $1600 ($280+$110*12)

these are all the information to be given for the above requested question.

i hope all the above given information is helpful to you.

thank you.