Entity t has not elected the proposed practical expedient


Case Assignment for Revenue Recognition:

  • Entity T, a TV manufacturer, enters into contract to ship 100 TVs from San Francisco to a customer in London for fixed consideration. The shipment from SF to London, by a 3rd party carrier, will take approximately 3 weeks.
  • Terms are FOB shipping point. Legal title of the TVs transfers to the customer upon delivery to carrier. Entity T arranges shipping and charges customer for shipping.
  • TVs were delivered to carrier 9 days before year end. Payment is due 30 days after receipt of goods.
  • Entity T is not obligated to but has a history of replacing (or crediting customer's account for) any TVs damaged during shipment. Entity T historically pursue claims against the carrier/insurance provider.
  • Entity T has not elected the (proposed) practical expedient for shipping.

Is shipping a separate performance obligation?

When does control of TVs transfer?

Solution Preview :

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Accounting Basics: Entity t has not elected the proposed practical expedient
Reference No:- TGS02397249

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