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For each situation indicate when a company should recognize revenue: Situation Recognition of Revenue a. On June 2, 2017, a customer books travel on an
For each situation indicate when a company should recognize revenue:
Situation | Recognition of Revenue | |
a. | On June 2, 2017, a customer books travel on an airline, paying $500 for a round-trip ticket that departs July 15, 2017, and returns July 20, 2017. In addition, once the round-trip ticket is used, the airline credits the passenger's frequent-flier account for 500 miles. The airline determines that each frequent-flier point has a value of $0.01. | |
b. | On May 1, 2017, a retailer enters into a contract with a construction company. The construction company will build a new warehouse for the retailer at a price of $2 million. The retailer will make four equal payments to the construction company over the 1-year construction period, starting on May 1, 2017, and then every 4 months. The retailer can cancel construction at any time and will own any construction to date; however, it must pay the construction company for work done up to the cancellation date. The building is completed on April 30, 2017. | |
c. | Morning Donut agrees to supply donuts and coffee on a daily basis to a local business. The contract starts on January 1, 2017, and runs for 1 year. Morning Donut charges $400 per week for the donuts and coffee. | |
d. | The Raleigh Knights sell four season tickets to a customer. The Knights play 10 regular season games, and the cost of one season ticket is $250. |
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