Allen Company is hired on December 15, 2016 to perform services, beginning on December 16, 2016 Under of service revenue should be recorded for the year ending December 31 2016 this agreemen!, Allen will arn $4,500 monthly and receive payment on January 15, 2017 What amount

A. 0

B. $4500

C. $2250

D. There is not enough information to answer this

The complete question is as under:

Allen Company is hired on December 15, 2016 to perform services, beginning on December 16, 2016. Under this agreement, Allen will earn $4,500 monthly and receive payment on January 15, 2017. What amount of service revenue should be recorded for the year ending December 31, 2016?

A. 0

B. $4500

C. $2250

D. There is not enough information to answer this

Answer:

Option C - $2250

Explanation:

Option C is correct because according to the accrual accounting, the salary that has be accrued for the services rendered by the Allen company will earn monthly $4500 on every 15 of the month. On 31 December, the half of the $4500 has been earned by the Allen and the company owes him in legal terms $2250 (Half of $4500). This means the Allen Company must recognize its sale $2250 and the company that contracted Allen must recognize expenses of $2250 at 31 December, 2017.