Question:
On October 1, 2013, Acme Fuel Co. sold 100,000 gallons of heating oil to Karn Co. at $3 per gallon.
Fifty thousand gallons were delivered on December 15, 2013, and the remaining 50,000 gallons were
delivered on January 15, 2014. Payment terms were 50% due on October 1, 2013, 25% due on first
delivery, and the remaining 25% due on second delivery. What amount of revenue should Acme
recognize from this sale during 2014?
a. $ 75,000
b. $150,000
c. $225,000
d. $300,000
Answer:
b. The earnings process is completed upon delivery of the product. Therefore, in 2014, revenue for
50,000 gallons at $3 each is recognized on January 15. The payment terms do not affect
revenue recognition.
On October 1, 2013, Acme Fuel Co. sold 100,000 gallons of heating oil to Karn Co. at $3 per gallon.
Fifty thousand gallons were delivered on December 15, 2013, and the remaining 50,000 gallons were
delivered on January 15, 2014. Payment terms were 50% due on October 1, 2013, 25% due on first
delivery, and the remaining 25% due on second delivery. What amount of revenue should Acme
recognize from this sale during 2014?
a. $ 75,000
b. $150,000
c. $225,000
d. $300,000
Answer:
b. The earnings process is completed upon delivery of the product. Therefore, in 2014, revenue for
50,000 gallons at $3 each is recognized on January 15. The payment terms do not affect
revenue recognition.
