Chapter 18, Problem 2CA

To determine

Revenue recognition: GAAP (Generally accepted accounting principle) states that under specific conditions only the revenue is recognized and accounted for.

Performance obligation: A promise to transfer goods or services is said to be the performance obligation. It exists if a customer gets benefits from goods or services with the available resources and is determined by the company.

(a)

To describe: To describe the revenue recognition principle.

To determine

(b)

To discuss: To discuss the relation of revenue recognition principles to the definition of assets and liabilities and also the importance of control.

To determine

(c) To explain: To explain whether collectibility a consideration in the recognition of revenue.