Ask Question
18 July, 00:08

Whispering Company sells goods that cost $301,000 to Ricard Company for $402,000 on January 2, 2020. The sales price includes an installation fee, which has a standalone selling price of $37,000. The standalone selling price of the goods is $365,000. The installation is considered a separate performance obligation and is expected to take 6 months to complete.

Whispering prepares an income statement for the first quarter of 2020, ending on March 31, 2020 (installation was completed on June 18, 2020). How much revenue should Whispering recognize related to its sale to Ricard

+3
Answers (1)
  1. 18 July, 00:26
    0
    The amount of revenue to be recognized at 31st March is $383500

    Explanation:

    The revenue amount that should be recognized in the income statement as at March 31,2020 is the sales price of $365000 plus three months of installation fee since installation is expected to last six months and three months have passed since installation began.

    Hence, the amount of revenue as at 31st March is calculated thus:

    Sales price $365000

    Installation fee for 3 months (3/6*$37000) $18500

    Total revenue as at 31st March $ 383,500

    The rationale behind this is that revenue is only recognized when the seller has discharged his or her obligation under the contract not when cash is received and it is very clear that installation has been undertaken for 3 out of 6 months
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Whispering Company sells goods that cost $301,000 to Ricard Company for $402,000 on January 2, 2020. The sales price includes an ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers