Complete Electronics Company sells a point-of-sale computer with a two-year service contract.Complete collects $2,000 cash for the selling price of the computer and $504 for the two-year service contract.How is revenue recognized?
A) Complete will record Sales Revenue of $2,504 when the computer is delivered to the customer.
B) Complete will record Sales Revenue of $1,252 per year for two years.
C) Complete will record Sales Revenue of $2,000 when the computer is delivered and Service Revenue of $21 per month for 24 months.
D) Complete will record Sales Revenue of $2,000 when the computer is delivered and will record revenue for the service contract as service calls are made.

Question

Quizplus · Accepted Answer

Revenue for the computer sale ($2,000) can be recognized when the product is delivered. Revenue for the service contract ($504) should be recognized over the two-year contract period, which would be $21 per month for 24 months. Therefore, the company will record Sales Revenue of $2,000 when the computer is delivered and Service Revenue of $21 per month for 24 months.

Complete Electronics Company Sells a Point-Of-Sale Computer with a Two-Year