Consider the following transactions of the Mitrovica Company, a diversified manufacturing and construction company, for the year ended December 31, 2014:
1. Leased office space to a tenant for a one-year period beginning October 1. Four months of rent at $2,000 per month was received in advance.
2. Received a sales order for merchandise that cost $9,000. It was sold for $16,000 on December 28 to Warfield Company. The goods were shipped FOB shipping point on December 31. Warfield received them on January 3, 2015.
3. Signed a long-term contract to construct a building at a total price of $2 million. The total estimated cost of construction is $1.4 million. During 2014, the company incurred $300,000 of costs and collected $175,000 in cash.
4. Mitrovica introduced a new product into the market. The company shipped new product costing $25,000 to its customers' retail outlets. The customers were billed $50,000 for the product. To promote the product, Mitrovica does not require payment until June 2015 and if Mitrovica's customers do not sell all of the product by June 2015, they can return the unsold product to Mitrovica. Th e product is new and Mitrovica is uncertain if it will sell.
5. Issued a $5,000, six-month, 4% note receivable on September 1, with interest payable at maturity.
6. Received a sales order from a new customer for $20,000 of merchandise that cost $10,000. The customer was required to prepay the invoice. On December 29, 2014, a cheque for $20,000 was received from the customer. The merchandise was shipped on January 4, 2015.
Instructions
For each item above, indicate the amount of revenue Mitrovica should recognize in 2014. Explain.