Question

Lewis Co. sold merchandise to AdCo for $43,000 and received $43,000 for that sale one month later. One week prior to receiving payment from AdCo, Lewis made a $9,000 payment to AdCo for advertising services that have a fair value of $5,000. After accounting for any necessary adjustments, how much revenue should Lewis Co. record for the merchandise sold to AdCo?

Answer 1

Answer:

Explanation:

Revenue recognition= [Transaction price-(Payment to advertisement-fair value)

Transaction price = $43,000

Payment to advertisement = $9,000

Fair value = $5,000

Thus, the revenue should Lewis co. record for the merchandise sold to Adco is:

= $43,000 - ($9,000 - $5,000)

= $39,000