Complete Electronics Inc. sells a point-of- sale computer with a two -year servi

Question

Complete Electronics Inc. sells a point-of- sale computer with a two -year service contract. Complete collects $4,000 cash for the selling price of the computer and $552 for the two -year service contract. How is revenue recognized? A. B. ° C. 0 D. Complete will record Sales Revenue of $4,000 when the computer is delivered and will record revenue for the service contract as service calls are made. Complete will record Sales Revenue of $4,000 when the computer is delivered and Service Revenue of $23 per month for 24 months. Complete will record Sales Revenue of $4,552 when the computer is delivered to the customer. Complete will record Sales Revenue of $2,276 per year for two years.

Explanation / Answer

As $4000 is the selling price of computer , therefore, it will be considered as sales revenue once the computer has been delivered.

But since the service contract is for two year time period, therefore for now it'll be considered as unearned revenue and will be considered as sale revenue as $23 for coming 24 months.

Therefore, answer is option B.

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