Mary signed up and paid $1200 for a 6 month ceramics course on June 1^st with Choplet Ceramics. As of August 1^st, Choplet's accounting records would indicate: A) $400 of revenue, $800 of accounts receivable B) $400 of revenue, $800 of deferred revenue C) $1,200 of revenue, $1,200 of cash D) $800 of revenue, $400 of accounts receivable

Question

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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, Choplet would recognize revenue of $400 ($1,200 × 2/6 of the contract duration) and deferred revenue of $800 ($1,200 contract price paid in advance - $400 revenue recognized to date).

Mary Signed Up and Paid $1200 for a 6 Month