Reference no: EM132672621

Research Problem - You recently obtained a new client that operates a chain of convenience stores that sell food and vehicle fuel. You notice that the company has a customer card program whereby customer purchases of fuel are entered on the card. For each gallon purchased, the customer is allowed a $0.05 discount per gallon purchased within the next three months. The client treats the $0.05 discount as "earned" by the customer (and deductible by the store) when the purchase is made, which gives the customer the right to the discount. The client justifies this as clearly reflecting the company's income because an obligation arises when the gasoline is purchased and the right to the future discount is earned. Is the client's accounting method correct? Explain.