Assume PRC Corp., an equipment distributor, sells a piece of machinery with a list price of $600,000 to ACH Inc. ACH will pay $650,000 in one year. PRC normally sells this type of equipment for 90% of list price. How much should be recorded as revenue? a. $585,000. b. $540,000. c. $600,000. d. $650,000.

Question

Business

William Hood

30 June, 11:05

Assume PRC Corp., an equipment distributor, sells a piece of machinery with a list price of $600,000 to ACH Inc. ACH will pay $650,000 in one year. PRC normally sells this type of equipment for 90% of list price. How much should be recorded as revenue? a. $585,000. b. $540,000. c. $600,000. d. $650,000.

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Charlie Harrington · Answer 1

b. $600,000

Explanation:

The company has to record as revenue the product at the list price, then if exist a special discount on the price list, it must be record as discount applied to products in the Income Statement, separate of Revenue or Gross Sales.

The price that the company ACH pay by the product ($650,000) it's not at change on the price if not due to the payments term which is one year later, so the company ACH has to pay a financial cost because the payment will be made one year later.