Gomez Company collected $9,000 on September 1, Year 1 from a customer for services to be provided over a one-year period beginning on that date. How much revenue would Gomez Company report related to this contract on its income statement for the year ended December 31, Year 1? How much would it report as cash flows from operating activities for Year 1?

Question

Quizplus · Accepted Answer

Gomez will recognize revenue earned for the 4 months between September 1 and December 31 ($9,000 × 4/12 = $3,000). However, the company will recognize the entire $9,000 received as a cash inflow for operating activities in Year 1.

Gomez Company Collected $9,000 on September 1, Year 1 from a Customer