Revenue-Recognition Decisions: A Slippery Slope?

Clark, Ronald L., The CPA Journal

Consider this scenario: Capitol Motors is in its first year of operations and as of December 30 has total revenues of $5 million, projected net income of $200,000, and total assets of $40 million (Capitol's year-end is December 31). On December 31, a customer and Capitol Motors agree to terms on the purchase of a new automobile for $25,000. The customer signs and completes all paperwork for the sale but asks Capitol to hold the full-payment check until he can complete financing with a local bank. Because the bank has already closed for the day, it will be January 2 before the customer can release the check to Capitol. The customer already has a $30,000 line of credit approved by his bank, …

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Publication information: Article title: Revenue-Recognition Decisions: A Slippery Slope?. Contributors: Clark, Ronald L. - Author. Magazine title: The CPA Journal. Volume: 76. Issue: 10 Publication date: October 2006. Page number: 6+. © New York State Society of Certified Public Accountants Feb 2009. Provided by ProQuest LLC. All Rights Reserved.

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