Reference no: EM131705210

Question: Ultima Company offers its customers discounts to purchase goods and take title before they actually need the goods. The company offers to hold the goods for the customers until they request delivery. This relieves the customers from making room in their warehouses for merchandise not yet needed. The goods are on hand and ready for delivery to the buyer at the time the sale is made. Ultima Company pays the cost of storage and insurance prior to shipment. Customers are billed at the time of sale and are given the normal credit period (90 days) to pay.

Required: Determine whether Ultima Company should recognize revenue from the sale of goods at the time title passes to the customer or whether it should defer revenue recognition until the goods are delivered to the customer.