Binz Company provides cleaning services and sells garbage bins to office clients

Question

Binz Company provides cleaning services and sells garbage bins to office clients. On June 1^st, Binz delivered 100 garbage bins to a client, and also entered into a 5-year contract for Binz to provide cleaning services to that client. Which of the following is most likely to be true? A. Revenue for the garbage bins and the cleaning services must be recognized on June 1^st. Revenue for the garbage bins is recognized on June 1^st and no revenue will be recognized for the cleaning services until the end of the 5^th year. Revenue for the garbage bins is recognized on June 1^st and revenue for the cleaning service is recognized over the 5 years as those services are performed. Binz Company should not recognize any revenue until the end of the 5^th year.

Explanation / Answer

Answer: c. Revenue for the garbage bins is recognized on June 1st and revenue for the cleaning service is recognized over the 5 years as those services are performed.

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