SATISFACTION OF PERFORMANCE OBLIGATIONS|Course hero helper

Posted: February 14th, 2023

 Assume McDonald’s enters into a contract to sell Billy Bear dolls for Toys4U Stores.  Based on the contract, McDonald’s displays the dolls in selected stores.  Toys4U is not paid until the dolls have been sold by McDonald’s, and unsold dolls are returned to Toys4U.

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  • Has Toy4U satisfied its performance obligation when it delivers the dolls to McDonald’s?  Explain your answer.

SOLUTION

 

The satisfaction of performance obligations refers to the point at which a company has fulfilled its contractual obligation to provide goods or services to a customer, and the customer is able to take control of and benefit from the goods or services. This is a key concept in revenue recognition accounting, and it typically occurs when a specific event or milestone has been reached, such as delivery of the goods or completion of a service.

The satisfaction of performance obligations is indeed a key concept in revenue recognition accounting, and it refers to the point at which a company has fulfilled its contractual obligation to provide goods or services to a customer, and the customer is able to take control of and benefit from the goods or services. This typically occurs when a specific event or milestone has been reached, such as delivery of the goods or completion of a service.

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