A customer pays $1,000 in advance for a service agreement.

A customer pays $1,000 in advance for a service agreement. What are the financial

statement effects of this transaction if (a) revenue is recognized at receipt of cash, and

(b) revenue is recognized at delivery of the product? What forecasts, if any, do you

have to make to complete the recording of this transaction? What factors would determine

which of these two approaches is appropriate? As a financial analyst, what

questions would you raise with the firm’s CFO?