Question

Boomerang Computer Company sells computers with an unconditional right to return the computer if the customer is not satisfied. Boomerang has a long history selling these computers under this returns policy and can provide precise estimates of the amount of returns associated with each sale. Boomerang most likely should recognize revenue:
1. When Boomerang receives cash from the customer.
2. When Boomerang delivers a computer to a customer.
3. When a customer returns a computer.
4. Never, because the right of return is unconditional.

Answer 1

Answer: The correct option is, option 1. When Boomerang receives cash from the customer.

Explanation: revenue is the income gotten from the business of an organization.

Every organization must have an estimated revenue which is used for taxing the organization. Due to this, Boomerang must have a revenue statement, which determine how much task it has to pay.

This revenue is calculated as the money at hand, and not the one to come, so therefore, he should calculate his revenue when a customer has paid for it's computer. Since very little amount of customers returns their computer after payment. Boomerang can add those returns in the debit account for the next financial statement, which will be subtracted from the revenue of that account.