D252 – Accounting Research.pdf Page 1 of 3 D252 – Accounting Research.pdf
D252 – Accounting Research
Phuong Nguyen
A. KTSB has agreed with Ramesses II to sell 300 Model E computers. This agreement brings many
potential accounting issues to KTSB regarding revenue recognition on the sales of computers to
Ramesses, including the following:
1. Revenue Recognition Timing: The agreement specifies that Ramesses II has the right to accept
the computers and place them on warehouse floors by September 1, with the legal title
transferring at the point of delivery. The shipment date for these computers is August 23, but the
payment is not due until net 90. These will create an accounting issue of revenue recognition
timing for KTSB. Therefore, KTSB will need to consider the delivery date, acceptance criteria, and
transfer of legal title to determine when to recognize the revenue on its book.
2. Sales Returns and Allowances: The agreement also indicates that KTSB allows Ramesses II to
return unsold products within 90 days. It will create another revenue recognition issue because
KTSB needs to estimate and account for potential sales returns and allowances that might affect
net sales.
3. Coupon Redemption: KTSB provides manufacturing coupons for customers, entitling them to
$100 off on Model E computers with a 90-day expiration date. KTSB will need to determine the
impact of the coupon redemption and when to recognize the reimbursement on the revenue.
4. Gift Card Commission: KTSB agrees with Ramesses II to pay a 3% commission on the value of gift
cards, which is higher than the industry standard rate of 2.5%. KTSB must evaluate the
importance of a higher commission on revenue and expense recognition.
5. Warranty Claims Handling: KTSB lets Ramesses II accept any warranty claims within the first
year. It also provides refund or exchange options to customers. It will incur additional costs, such
as shipping and other expenses, which can significantly impact a company’s profitability.
Therefore, KTSB needs to account for warranty claims, item returns, and other expenses
associated with the claims, which include the timing of recognition and estimation of liabilities
for warranty obligations.
This study source was downloaded by 1827175 from cliffsnotes.com on 01-08-2026 17:37:00 GMT -06:00
D252 – Accounting Research.pdf D252 – Accounting Research.pdf 2026/2027
https://www.cliffsnotes.com//study-notes/6412654
D252 – Accounting Research
Phuong Nguyen
A. KTSB has agreed with Ramesses II to sell 300 Model E computers. This agreement brings many
potential accounting issues to KTSB regarding revenue recognition on the sales of computers to
Ramesses, including the following:
1. Revenue Recognition Timing: The agreement specifies that Ramesses II has the right to accept
the computers and place them on warehouse floors by September 1, with the legal title
transferring at the point of delivery. The shipment date for these computers is August 23, but the
payment is not due until net 90. These will create an accounting issue of revenue recognition
timing for KTSB. Therefore, KTSB will need to consider the delivery date, acceptance criteria, and
transfer of legal title to determine when to recognize the revenue on its book.
2. Sales Returns and Allowances: The agreement also indicates that KTSB allows Ramesses II to
return unsold products within 90 days. It will create another revenue recognition issue because
KTSB needs to estimate and account for potential sales returns and allowances that might affect
net sales.
3. Coupon Redemption: KTSB provides manufacturing coupons for customers, entitling them to
$100 off on Model E computers with a 90-day expiration date. KTSB will need to determine the
impact of the coupon redemption and when to recognize the reimbursement on the revenue.
4. Gift Card Commission: KTSB agrees with Ramesses II to pay a 3% commission on the value of gift
cards, which is higher than the industry standard rate of 2.5%. KTSB must evaluate the
importance of a higher commission on revenue and expense recognition.
5. Warranty Claims Handling: KTSB lets Ramesses II accept any warranty claims within the first
year. It also provides refund or exchange options to customers. It will incur additional costs, such
as shipping and other expenses, which can significantly impact a company’s profitability.
Therefore, KTSB needs to account for warranty claims, item returns, and other expenses
associated with the claims, which include the timing of recognition and estimation of liabilities
for warranty obligations.
This study source was downloaded by 1827175 from cliffsnotes.com on 01-08-2026 17:37:00 GMT -06:00
D252 – Accounting Research.pdf D252 – Accounting Research.pdf 2026/2027
https://www.cliffsnotes.com//study-notes/6412654
