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Cases on Recognition Measurement
The Barter Case
"Will that be cash?"
Ben Sawyer had started handcrafting replicas of antique furniture
as a retirement hobby, but at the urging of friends he later opened
a small shop to sell his products. It proved an immediate success,
first with the "summer people" and then with dealers, several of
whom encouraged Ben to supplement his line of small tables and
bookcases with larger pieces. Ben decided to give it a try. After
closing the shop for the winter, he worked in the basement of his
home designing an impressive mahogany sideboard and building two of
them by the shop's spring reopening. Materials costs (for wood)
amounted to $700 for each; Ben's labor, priced at the going wage
rate was $500 for each. No overhead costs were incurred.
Although familiar with the market for casual "antique"
furnishings, Ben was uncertain about an appropriate price for his
sideboards. From a review of catalogues offering pieces
mass-produced from cheaper woods, he concluded that a figure of
$3,000 to $4,000 was about right for handcrafted mahogany.
Accordingly, he priced each sideboard at $3,000 ("and I'm ready to
haggle if somebody's ready to buy," he told Mrs. Sawyer).
Within one week, Ben sold both sideboards with no haggling. He
sold the first one on reopening day to Will Bascomb, a dealer he
knew well. "Beautiful work, Ben," said Will. "I want it, but I'm
going to be short of cash for a while. How about $1,000 down and
the balance in quarterly installments for a year?" Done. Cash, a
non-interest-bearing note, and sideboard changed hands.
The second sale came two days later. Seth Forester, Ben's wood
supplier since the hobby-only days, dropped by to see if Ben needed
any materials and was captivated by the sideboard. "I don't
remember when I last had $3,000 in one lump," said Seth, "and I
don't reckon to have it anytime soon. But craftsmen like you always
need wood. How about if I pay you in wood-enough for mine and three
others. Wood for sideboard, OK?" "OK."
When Mrs. Sawyer returned from a week in Florida, Ben hastened to
tell her the good news that both sideboards had sold. "That's
great, Ben!" she said. "How much did we get for them?"
* * * *
- How should Sawyer recognize the sideboard sales?
- How should Bascomb and Forester recognize the sideboard
purchases?
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