Helen Hines,Solicitor,performed bankruptcy services for a client and billed the full fee of $6 000 on 20 September 2017.Hines is uncertain if she will collect the fee.At 31 December 2017,she had collected $900 and in 2018 has collected an additional $2 000.How much service revenue should Hines report in 2017 and 2018,respectively?
A)$3 000,$3 000
B)$900,$2 000
C)$6 000,$0
D)$0,$6 000

Question

Quizplus · Accepted Answer

The correct answer is B because the revenue recognition principle states that revenue should be recognized when it is earned and not when it is collected. In this case, Hines earned the revenue when she performed the services in 2017, so she should recognize $900 of revenue in 2017 and $2,000 of revenue in 2018.

Helen Hines,Solicitor,performed Bankruptcy Services for a Client and Billed the Full