medium · Financial Accounting revenue-recognition
A company sells a product for $1,000 with a 30-day right of return. Based on history, they expect100 of returns. At day 15, they receive new information that $200 of returns is now expected.
What is the accounting action on day 15?
- Record a 100 decrease in revenue and a100 increase in refund liability.
- Record a $100 loss on the Income Statement.
- Reverse the entire sale and re-record it once the return period ends.
- Do nothing until the 30-day period expires.
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