Johnson sells $100,000 of product to Robbins, and also purchases $10,000 of advertising services from Robbins. The advertising services have a fair value of $8,000. Johnson should record revenue on its sale of product to Robbins of:
A) $100,000
B) $98,000
C) $92,000
D) $90,000

Question

Quizplus · Accepted Answer

Johnson is paying more for advertising services than the fair value of those services, so the excess of $2,000 (computed as $10,000 price paid - 8,000 fair value of the services) is viewed as a refund of part of the $100,000 sale. Therefore, Johnson records revenue of $98,000 (computed as $100,000 - 2,000).

Johnson Sells $100,000 of Product to Robbins, and Also Purchases