Question

In: Accounting

18. A “bill and hold” scheme is most likely to include: A) Shipment of items to...

18. A “bill and hold” scheme is most likely to include:

A) Shipment of items to a customer beyond what the customer has ordered.

B) Recording as sales items those that the seller retains in inventory as of year-end.

C) Billing of items that are held by customers for future revenue production purposes.

D) Selling items at substantial discounts near year-end.

Solutions

Expert Solution

Bill and hold is a type of sales arrangement that enables payment ahead of the delivery of the item. It constitutes arrangement in which the seller of the product bills a customer for the product upfront but does not ship the product until a later date.

For transfer of ownership the products should be sent out, certain conditions must be met. These conditions may include the payment for goods, segregation of these goods from other similar goods and the goods are to be finished and ready for use.

The bill and hold arrangement may be beneficial to both the seller and buyer, but great care to be taken by the both parties to ensure that all the conditions of the arrangement have been made or not. if the arrangement does not meet all the criteria of the bi and hold arrangement then there will be no transfer of ownership it means no revenue should be recognised by the seller and no addition of inventory or disclosure of assets by the buyer of the products.

both the buyer and seller should be more cautious regarding the terms and conditions of the arrangement because this arrangement involve more possibilities to do scams.

Hence, bill and hold arrangement includes recording are sale items those that the seller returns in inventory as of year end.

The answer is option A.

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