Question

On May 1, 2016, Varga Tech Services signed a $6,000 consulting contract with Shaffer Holdings. The contract requires Varga to provide computer technology support services whenever requested over the period from May 1, 2016, to April 30, 2017, with Shaffer paying the entire $6,000 on May 1, 2016.How much revenue should Varga recognize in 2016? (Do not round intermediate calculation.)

Answer 1

Answer:

$4,000

Explanation:

Given that,

Varga Tech Services signed a contract with Shaffer Holdings on May 1, 2016.

Total revenue = $6,000

Remaining months in the year 2016 = 1 May 2016 to 31st December 2016

                                                            = 8

Therefore,

Proportionate Contract revenue to be recognized in 2016:

= $6,000 × (8 ÷ 12)

= $4,000