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Assume a contract for the sale of goods specifies that the seller will receive cash 20 months after delivery of a product. The seller is likely to do which of the following with respect to the time value of money over the life of the contract?
A. Recognize interest expense.
B. Recognize additional cost of goods sold.
C. Ignore the time value of money.
D. Recognize interest revenue.

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Answer:

D. Recognize interest revenue.

Explanation:

A dollar received today is worth more than a dollar received tomorrow. The seller will recognize revenue at the Present Value of the amount that he expects to get in 20 months time. That is recognize interest revenue

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