Your company uses an accrual method of account and an outside vendor to ship all of your inventory. Company policy states the product is not shipped to the customer for 10 days after receipt of payment from which also allows for sufficient time for the funds clear the bank. However, commissions are paid to your sales staff for all funds received by the end of the month whether they have been shipped.

On December 26, 2009, you receive and deposit $10,000 from customer A for Coins. Commission check is paid the sales staff on January 2nd of $1,000. You pay the vendor $8,000 for the coins on January 5th and they ship the coins to Customer A on January 5th via express mail through the post office. Customer A receives the coins on January 6th.



1. When is the income recognized?

2. When does ownership of the inventory occur?

3. Are you entitled to the deduction for the commissions in 2009 or 2010?

4. When does ownership of the inventory transfer to the customer on January 6th or January 7th ?

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