Jones Corporation enters into a contract with Warner Video to add their programs to Jones' network. Warner will pay Jones an upfront fixed fee of $250,000 for 12 months of access, and will also pay a $110,000 bonus if Jones' users access Warner Video for at least 10,000 hours during the 12 month period. Jones estimates that it has a 60% chance of earning the $110,000 bonus. Refer to Jones Corporation. Upon collection of the upfront fee, Jones would recognize a(n) ________.
A) unearned revenue of $250,000
B) unearned revenue of $360,000
C) prepaid revenue of $250,000
D) prepaid revenue of $360,000

Question

Quizplus · Accepted Answer

The upfront fee of $250,000 is considered unearned revenue because Jones has not yet provided the service of 12 months of access. The bonus is contingent and not recognized until it is earned.

Jones Corporation Enters into a Contract with Warner Video to Add