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D is corrent. The requirement is to determine the statement that is correct regarding Hayworth’s current year financial statements. Generally, sales revenue is recognized at the date of delivery, because that is the time at which a sale has occurred. At that point, the two criteria for revenue recognition are normally met: (1) the revenue is realized or realizable, and (2) it is earned. In this case, Hayworth has not earned all of the income because it has not fulfilled all requirements related to the service contract and, therefore, should not recognize all of the revenue in the year the equipment is sold. Consequently, net income is overstated.
A is incorrect. Generally, sales revenue is recognized at the date of delivery, because that is the time at which a sale has occurred. At that point, the two criteria for revenue recognition are normally met: (1) the revenue is realized or realizable, and (2) it is earned. In this case, Hayworth has not earned all of the income because it has not fulfilled all requirements related to the service contract and, therefore, should not recognize all of the revenue in the year the equipment is sold. Consequently, net income is overstated.  
B is incorrect. Generally, sales revenue is recognized at the date of delivery, because that is the time at which a sale has occurred. At that point, the two criteria for revenue recognition are normally met: (1) the revenue is realized or realizable, and (2) it is earned. In this case, Hayworth has not earned all of the income because it has not fulfilled all requirements related to the service contract and, therefore, should not recognize all of the revenue in the year the equipment is sold. Consequently, net income is overstated. 
A is incorrect. Generally, sales revenue is recognized at the date of delivery, because that is the time at which a sale has occurred. At that point, the two criteria for revenue recognition are normally met: (1) the revenue is realized or realizable, and (2) it is earned. In this case, Hayworth has not earned all of the income because it has not fulfilled all requirements related to the service contract and, therefore, should not recognize all of the revenue in the year the equipment is sold. Consequently, net income is overstated.