Question

Derby company sells season passes to its entertainment center. the passes sell for​ $75 each and are good for the year. on january​ 1, derby sells​ 3,000 passes and received cash. refer to derby company. the amount of revenue to be recognized each month is​ ________.

Answer 1

18750 Explanation: As per Revenue Recognition Principle, one of the principles is the amount of revenue can be reasonably measured, that means the revenue earned should be measurable. Another principle is costs of earning the revenue can be reasonably measured. Therefore, the revenues and costs should both be reasonably measurable. In the above case, both revenue and cost are measurable. In the above case, the passes are sold in advance because the passes are good for one year, that means the customers paid the money in advance for the whole year on January 1. Advance payments are generally considered as current liabilities in company's balance sheet and the revenue will be recognized with time as the services will be provided. So, in this case, the total revenue is 75 x 3000 = 225, 000 (whole year), Per month revenue will be 225,000/12 = 18,750 .