Cosmos Computer Consulting is preparing their year-end financial statements.They completed two projects in the last month: one worth $12,000 that they have billed the customer for but not yet been paid, and one worth $18,000 that they have not yet had a chance to bill the customer for.In the case of the second contract they had received a $3,000 deposit at the beginning of the contract.With respect to these two contracts what amount would be recorded as Revenue for Cosmos at year-end?
A)$12,000
B)$15,000
C)$27,000
D)$30,000

Question

Quizplus · Accepted Answer

Revenue recognition principles allow companies to record revenue when it is earned, regardless of when payment is received. For the first project, $12,000 is recognized because it was billed, indicating the work was completed. For the second project, the full $18,000 is recognized as revenue because the work was completed, even though it hasn't been billed yet. The $3,000 deposit is not revenue; it's a liability until the work is done. Therefore, the total revenue recognized is $12,000 + $18,000 = $30,000.

Cosmos Computer Consulting Is Preparing Their Year-End Financial Statements