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 $5,040 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

Question

Jillian Grimes

Business

2 November, 01:22

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 $5,040 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

+4

Answers (1)

Know the Answer?

Ulises Wells · Answer 1

840 revenue earned

Explanation:

It will recognize revenue for the earned portion of the contract:

November 1st to December 31th

It would be 2 months earned

if 5,040 is the value of the one-year contract then

5,040 / 12 = 420 value of 1 month

420 x 2 = 840 revenue earned for the period November 1st to December 31th

The payment date is irrelevant, because the service are earned through time. It would become bad debt expense if not colelcted later down the road.