A company entered into a 2-month contract for $50,000 on April 1. It earned $25,000 of the contract services in April and billed the customer. The company should recognize the revenue when it receives the customer's check.

Question

Quizplus · Accepted Answer

The company should recognize the revenue as earned in April when it provided the services, regardless of whether or not it has received payment. Revenue recognition should not be dependent on the timing of receipt of payment. Therefore, the company should recognize $25,000 of revenue in April and the remaining $25,000 in May when it completes the contract.

A Company Entered into a 2-Month Contract for $50,000 on April