Question

Maas LLP developed software that helps farmers to plow their fields in a manner that prevents erosion and maximizes the effectiveness of irrigation. Sunny Dale paid a licensing fee of $20,000 for a copy of the software. Although Sunny Dale can use the software as long as it wants, Maas expects that Sunny Dale will use the software for approximately 5 years. Maas does not anticipate any further interaction with Sunny Dale following transfer of the license. How much revenue should Maas recognize in the first year of the contract? A. $0 B. $4,000 C. $5,000 D. $20,000

Answer 1

Answer:

The correct option is D. $ 20,000

Explanation:

$ 20,000 is the revenue that will recognize in the first year of the contract Because the company Mass LLP will have no more continuing involvement with the Company Sunny Dale.

All the license transfers a right of use to Sunny Dale, and all license revenue $20,000 will be recognized upon transfer of control of the software to the customer