5. Consider the following three scenarios: I. ABC Lawncare performed lawn mainte
ID: 2342097 • Letter: 5
Question
5. Consider the following three scenarios: I. ABC Lawncare performed lawn maintenance services for Drake Inc. on June 1st, and received payment of $500 for those services. II. On June 1st, Melly Corp received payment for 100 pounds of raw material to be delivered to Drake Inc. in 6 months. III. Lodo, LLC collected cash on June 1St for services rendered on May 1st, Given these scenarios, revenue cannot be recognized on June 1st for: B) I only C) II, III only D) III only 6. On November 1, 2018, Taylor signed a one-year contract to provide handyman services on an as-needed basis to King Associates, with the contract to start immediately. King agreed to pay Taylor $4,800 for the one-year period. Taylor is confident that King will pay that amount, but payment is not scheduled to occur until 2019. Taylor should recognize revenue in 2018 in the amount of A) $0. B) $800. C) $2,400. D) $4,800.Explanation / Answer
5.Option (C) is correct. Revenue cannot be recognized on June 1 for II and III scenarios on June 1 here.
In the first scenario, thye company performed the services on June1 and received the payment on 1 June. So, all the contract is complete and company can recognize the revenue on that date.
In the second scenario, Delivery is not yet done. Means all the risks and rewards of ownership have not yet been transferred to the buyer (which is one of the essential conditions of revenue recognition). Here, a contract liability (eg unearned sales revenue) will be recognized but not the revenue.Revenue will be recognized when the delivery will take place.
In the third scenario, LODO LLC performed the services on May 1st, so it should recognize the revenue on May1. It received the cash on June 1. By June 1, the revenue has already been recognized (on May 1)
Due to Chegg's policy, we will be able to answer only the 1st question. Kindly be informed. Thank you.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.