Detailed Answer
(c) Generally, goods are considered sold when legal title
to the goods passes to the buyer. In certain situations, however,
the transfer of title criteria does not reflect the underlying economics
of the situation. In this situation, although transfer of legal
title may not have occurred for the 500 segregated desks, the economic
substance of the transaction is that the seller no longer retains
the risks of ownership. Therefore, all 5,000 desks (including
the 500 segregated and accepted desks) are considered sold in year
2, and revenue of $550,000 is recognized (5,000 × $110). Note
that the amount of cash collected ($450,000) does not affect the
amount of revenue recognized in this case.