Jaymar Software Corporation sells SPAM BE GONE to customers, who receive the software and have access to postdelivery telephone support and the right to receive certain upgrades and enhancements if and when Jaymar Software develops them.Jaymar Software sells SPAM BE GONE for approximately $100; customers pay cash or with a credit card.When should Jaymar Software recognize revenue from selling SPAM BE GONE?
A)It recognizes revenue from sale of the software at the time of delivery and revenue associated with future obligations over the product's life cycle.
B)It recognizes revenue from sale of the software over the product's life cycle and revenue associated with future obligations at the time of delivery.
C)It recognizes revenue from sale of the software and the revenue associated with future obligations over the product's life cycle.
D)It recognizes revenue from sale of the software and the revenue associated with future obligations at the time of delivery.
E)none of the above.

Question

Quizplus · Accepted Answer

According to the revenue recognition principle, revenue should be recognized when the performance obligation is satisfied. In this case, the performance obligation is satisfied at the time of delivery of the software. However, the revenue associated with future obligations, such as post-delivery telephone support and upgrades/enhancements, should be recognized over the product's life cycle as these are ongoing obligations. Therefore, revenue should be recognized at the time of delivery and also associated with future obligations over the product's life cycle.

Jaymar Software Corporation Sells SPAM BE GONE to Customers, Who