Question

Telephone Sellers Inc. sells prepaid telephone cards to customers. Telephone Sellers then pays the telecommunications company, TeleExpress, for the actual use of its telephone lines related to the prepaid telephone cards. Assume that Telephone Sellers sells $4,900 of prepaid cards in January 2014. It then pays TeleExpress based on usage, which turns out to be 50% in February, 30% in March, and 20% in April. The total payment by Telephone Sellers for TeleExpress lines over the 3 months is $2,300. Indicate how much income Telephone Sellers should recognize in January, February, March, and April
January income_________?
February income_________-?
March income________?
April income___________?

Answer 1

Answer:

January Income = $0

February Income =  50% * ($4,900 - 2,300) =  $1,300

March Income   =  30% * ( $4,900 - $2,300)  =   $780

April Income   =  20% * ($4,900 -   $2,300)  =   $520

Explanation:

The amount received on the prepaid card will not be recognised in the amount because  the revennue has not being recorgnized.