Reference no: EM13511986

At what point should revenue be recognized in each of the following independent cases?

Case A. For Christmas presents, a McDonald's restaurant sells coupon books for $10. Each of the $1 coupons may be used in the restaurant any time during the following 12 months. The customer must pay cash when purchasing the coupon book.

Case B. Howard Land Development Corporation sold a lot to Quality Builders to construct a new home. The price of the lot was $50,000. Quality made a down payment of $100 and agreed to pay the balance in six months. After making the sale, Howard learned that Quality Builders often entered into these agreements but refused to pay the balance if it did not find a customer who wanted a house built on the lot.

Case C. Driscoll Corporation has always recorded revenue at the point of sale of its refrigerators. Recently, it has extended its warranties to cover all repairs for a period of seven years. One young accountant with the company now questions whether Driscoll has completed its earning process when it sells the refrigerators. She suggests that the warranty obligation for seven years means that a significant amount of additional work must be performed in the future.