It is appropriate to recognize the revenue in this first transaction as the conditions of the revenue are met in this transaction.In this case, it has been determined that the risk has been transferred to the YFinity which is the buyer. This is one of the important principles to recognize revenue. If the risk is still with the seller, then one should not recognize the revenue since buyer essentially has not sold the goods (Dyson, 2015).In this scenario, the auditor of the firm determined that the risk is transferred from buyer to seller and this indicates that the revenue can be recognized.
In addition to this there is assurance that the goods will be collected by the customer. This is an important aspect as it can be used to decide whether revenue can be recorded as the firm can say that the customer will take the delivery of the cable.
The revenue amount to be received from the deal can be reasonably ascertained. Hence, 1000 foot cable at the rate of $3 per cable will give the revenue of $3000 is certain and revenue can ascertained. Firm has decided the length of cable which will be sold to the client. Hence it is not the case where the firm has vaguely mentioned that it will buy the cable from company but it has mentioned the exact length of cable and the rate per unit of cable. The, the exact revenue can be determined by the firm. This amount of revenue will be recorded in the books of the company (Yeaton, 2015).
Another aspect is that the cost of earnings can be determined. The firm knows how much quantity is to be delivered firm by making use of its costing system and it can know the cost of earnings.
Lastly by making the goods virtually sold, firm has lost the control of the goods. Firm is not going to use the cable in the ware house and it cannot be sold any other customer. Firm do not have any additional requirements from other customer. It can be safe to assume that the firm has lost the control of the goods.
Hence, it is appropriate for the firm to recognize the revenue as the conditions for accounting the revenue are satisfied in this deal.