Indy Bikes is the bike share system in Indianapolis. Indy Bikes provides residents and visitors with a convenient, fun and affordable transportation option for exploring Indianapolis. Indy Bikes, consists of a fleet of specially designed e bikes that can be unlocked from one bike station and returned to any other station in the system. Indy Bikes is available for use 24 hours/day, 7 days/week, 365/days/year. Indy Bikes is owned by the City of Indianapolis. The city had been maintaining the system through the Indianapolis Department of Transportation but has elected to outsource the program effective July 1, 2022. Effective July 1, 2022, Indianapolis entered into an agreement with Big City Bikes. The city outsourced all day-to-day management/operations to Big City Bikes. Big City is responsible for obtaining/maintaining all of the bike equipment (bikes/parking docks, etc.), collecting the bike fees, etc. while the city of Indianapolis will retain ownership of the system. The contract stipulates that in exchange for operating Indy Bikes Big City Bikes will receive 60% of all bike fees that are paid by riders. Big City will remit the remaining 40% of the bike fees to the city of Indianapolis. Big City will have the responsibility for replacing any bikes in need of repair and adding new bikes to the system.

Assume the following for the quarter ending of September 2022:

Ridership Fees Collected by Big City Bikes: $2,400,000

Big City Bikes Expenses: 1,100,000

Big City Purchases of new Bikes, Docking Stations 200,000

Accounting Issue: How much revenue should Big City Bikes recognize for the quarter ending September 30, 2022?

Codification Reference:

Your Interpretation of the Guidance: The amount of revenue that Big City Bikes should recognize for the quarter ending September 30, 2022 is:

$2,400,000

$1,440,000

$1,300,000

$1,100,000

$ 340,000

$ 140,000