Tech-Rite Company has several long-term contracts for providing consulting services. Tech-Rite uses the proportional performance method to
Question:
Tech-Rite Company has several long-term contracts for providing consulting services. Tech-Rite uses the proportional performance method to recognize revenue. Tech-Rite sells 3-year contracts for $3,000 in advance to provide services over the 3-year period. Each contract requires Tech-Rite to perform IT services a total of 90 times and requires Tech-Rite to perform HR services a total of 30 times. The contribution to revenue for each IT and each HR performance is equal. At the beginning of 2013, 500 contracts were sold with the following data:
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Required:
1. When should Tech-Rite recognize revenue on these contracts? At inception? During performance? When performance is complete? Why or why not?
2. Prepare condensed income statements for 2013, 2014, and 2015 for Tech-Rite.
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Step by Step Answer:
1 Since the service contract specifies the acts to be performed revenue is recognized in proportion ...View the full answer
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Related Book For 
Intermediate Accounting Reporting and Analysis
ISBN: 978-1111822361
1st edition
Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach
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