Assume the following scenarios.

Scenario 1: During 2021, IBM provides consulting services on its mainframe computer for $10,600 on account. The customer does not pay for those services until 2022.

Scenario 2: On January 1, 2021, Gold's Gym sells a one-year membership for $1,248 cash. Normally, this type of membership would cost $1,560, but the company is offering a 20% "New Year's Resolution" discount.

Scenario 3: During 2021, The Manitowoc Company provides shipbuilding services to the U. S. Navy for $390,000. The U. S. Navy will pay $130,000 at the end of each year for the next three years, beginning in 2021.

Scenario 4: During 2021, Goodyear sells tires to customers on account for $30,600. By the end of the year, collections total $26,000. At the end of 2022, it becomes apparent that the remaining $4,600 will never be collected from customers. Required: For each scenario, calculate the amount of revenue to be recognized in 2021. Revenue recognized in 2021

Question

Adonis Farrell

Business

6 August, 02:21

Assume the following scenarios.

Scenario 1: During 2021, IBM provides consulting services on its mainframe computer for $10,600 on account. The customer does not pay for those services until 2022.

Scenario 2: On January 1, 2021, Gold's Gym sells a one-year membership for $1,248 cash. Normally, this type of membership would cost $1,560, but the company is offering a 20% "New Year's Resolution" discount.

Scenario 3: During 2021, The Manitowoc Company provides shipbuilding services to the U. S. Navy for $390,000. The U. S. Navy will pay $130,000 at the end of each year for the next three years, beginning in 2021.

Scenario 4: During 2021, Goodyear sells tires to customers on account for $30,600. By the end of the year, collections total $26,000. At the end of 2022, it becomes apparent that the remaining $4,600 will never be collected from customers. Required: For each scenario, calculate the amount of revenue to be recognized in 2021. Revenue recognized in 2021

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Answers (1)

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Landen Farmer · Answer 1

Scenario 1: It will recognize 10,600 revenue as the services were performed.

Scenario 2: It will recognize 1,560 revenue and the difference will be considered a sales discount.

Scenario 3: The services were provided during 2021 the cash disbursement are not linked to future services thus, Manitowoc will recognize 390,000 as sales revenue

Scenario 4: the company will recognize revenue for 30,600

If the remainining is expected to not be collected the accounting will use the allowance for doubtful account and bad debt expense to match the expense when the period they were generate but, it will not decrease the sales reveneu account.