S3-4. (Learning Objective 2: Apply the revenue and expense recognition principles) A largeauto manufacturer sells large fleets of vehicles to auto rental companies, such as Budget andHertz. Suppose Budget is negotiating with the auto manufacturer to purchase 1,000 vehicles.Write a short paragraph to explain to the auto manufacturer when the company should, andshould not, record this sales revenue and the related expense for cost of goods sold. Mention theaccounting principles that provide the basis for your explanation.

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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S3-4. (Learning Objective 2: Apply the revenue and expense recognition principles) A large
auto manufacturer sells large fleets of vehicles to auto rental companies, such as Budget and
Hertz. Suppose Budget is negotiating with the auto manufacturer to purchase 1,000 vehicles.
Write a short paragraph to explain to the auto manufacturer when the company should, and
should not, record this sales revenue and the related expense for cost of goods sold. Mention the
accounting principles that provide the basis for your explanation.

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