On November 1, 2018, Taylor signed a one-year contract to provide handyman services on an as-needed basis to King Associates, with the contract to start immediately. King agreed to pay Taylor $4,800 for the one-year period. Taylor is confident that King will pay that amount, but payment is not scheduled to occur until 2019. Taylor should recognize revenue in 2018 in the amount of
A) $0.
B) $800.
C) $2,400.
D) $4,800.

Question

Quizplus · Accepted Answer

This arrangement qualifies for revenue recognition over time because the customer consumes the benefit of the seller's service as the seller provides it. Therefore, Taylor would recognize revenue of $800 ($4,800 × 2/12 of the contract duration).

On November 1, 2018, Taylor Signed a One-Year Contract to Provide