Question:Daley Motors, a car dealer, receives motor vehicles from Ottocars Co, a manufacturer, on a consignment basis.
Which of the following are indications that the cars should be accounted for as assets of Daley Motors, at the time of delivery from Ottocars?
A. Daley Motors pays a price based on the price when Daley motors sells the vehicle.
B. Daley Motors has the right to return the cars to Ottocars without penalty.
C. Ottocars has the right to require Daley Motors to return the cars.
D. Daley Motors bears the risk of obsolescence.
The correct answer is: Daley Motors bears the risk of obsolescence.
This is the only factor which provides evidence that the risks and rewards of ownership have passed to the dealer.
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