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Vroom just began selling chainsaws with a three-year right-to-return policy, starting from the date of...

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Accounting

Vroom just began selling chainsaws with a three-year right-to-return policy, starting from the date of the purchase. Since this is a new policy, the company has had no experience with the policy and cannot accurately estimate returns. What is the longest period of time that Vroom may have to wait before recognizing revenue associated with one of these sales?

Multiple Choice

  • No time delay, recognize revenue upon delivery.

  • Vroom should recognize revenue as cash is received.

  • Vroom should defer revenue recognition until costs are recovered.

  • Three years, after the right of return has expired.

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