For each of the following situations based on SAB No. 101, indicate the audit ev
ID: 2450656 • Letter: F
Question
For each of the following situations based on SAB No. 101, indicate the audit evidence that should be obtained to determine whether revenue should be recognized or not in the current period.
Your client, Thomson Telecom, maintains an inventory of telecommunications equipment. Bayone Telephone Company placed an order for 10 new transformers valued at $5 million, and Thomson delievered them just prior to December 31. Thomson;s normal busincess practice for this class of customer is to enter into a written sales agreement that requires the signatures of all the authorized representatives of Thomson and its customer before the cotnract is binding. However, Bayone has not signed the sales agreement because it is awaiting the requisite approval by the legal department. Bayone's purchasing department has orally agreed to the contract, and the purchasing manager has assured you that the contract will be approved the first week of next year.
Explanation / Answer
tansformer value-@5 million
The Commission also has noted that in applying the criteria to a purported bill and hold sale, the individuals responsible for the preparation and filing of financial statements also should consider the factors:
The seller's past experiences with and pattern of bill and hold transactions;
its is valid but in other scenerio,
Delivery generally is not considered to have occurred unless the product has been delivered to the customer's place of business or another site specified by the customer. If the customer specifies an intermediate site but a substantial portion of the sales price is not payable until delivery is made to a final site, then revenue should not be recognized until final delivery has occurred. and sales agreement is also not signed..
.The seller's past experiences with and pattern of bill and hold transactions;
- commitment to accept and pay for the goods sold (i.e., that the business reasons for the bill and hold have not introduced a contingency to the buyer's commitment).Related Questions
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