O.K.C. Company collected $8,400 in May of 2010 for 4 months of service which would take place from October of 2010 through January of 2011. The revenue reported from this transaction during 2010 would be
A) 0.
B) $6,300.
C) $8,400.
D) $2,010.

Question

Quizplus · Accepted Answer

The revenue can only be reported when the service is provided. Since the service will take place from October 2010 through January 2011, no revenue can be reported until October of 2010. Therefore, only 3 months of service will be provided in 2010 (October, November, and December). To calculate the revenue that can be reported in 2010, we need to determine what portion of the $8,400 collected is attributable to these 3 months of service.

$8,400 ÷ 4 months = $2,100 per month
$2,100 per month x 3 months = $6,300

Therefore, $6,300 of revenue can be reported in 2010.

OKC Company Collected $8,400 in May of 2010 for 4