Question

SilverStone Inc. supplies emission systems worth $100,000 to Horizon Enterprises. As per the terms of sale contract, SilverStone takes back all unused emission systems. Horizon estimates that 5% of the emission systems will be returned. Under IAS 18, only four out of the five conditions for recognizing revenue from the sale of goods are met as economic benefits of 95% of sale will flow to SilverStone. How much revenue should be recognized by SilverStone Inc.

Answer 1

Answer:

The entire $100,000 sales price can be currently recognized since most of the conditions have been met.

Explanation:

Remember, it was mentioned that Silverstone accepted the terms of the sales contract that states "SilverStone takes back all unused emission systems." But a new point was mentioned that four out of the five conditions were met by Silverstone which could grant them 95% percent of sales.

Thus, they can recognize the sales since most conditions were met.