Question

Johnson sells $107,000 of product to Robbins, and also purchases $11,400 of advertising services from Robbins. The advertising services have a fair value of $8,700. Johnson should recognize total revenue to account for these events of:

Answer 1

Johnson should recognize a revenue of $104,300

What is revenue?

Revenue means the amount generated from the normal operations of the business through sale of goods or rendering services.

In the case, Johnson incurs an extra cost for the product purchased from Robbins, which means that such extra cost implies losses which should be deducted from Johnson's overall revenue.

In this case, the amount paid by Johnson to Robbins for the purchases is more than the fair value(the reasonable market price), hence, the excess of the amount paid over fair value should be deducted from the sales revenue of $107,000.

revenue=$107,000-($11,400-$8,700)

revenue=$107,000-$2,700

revenue=$104,300

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