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Revenue from services

This topic has 1 reply, 2 voices, and was last updated 9 years ago by John Moffat.

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October 4, 2016 at 5:21 pm #342382
mirai
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- Topics: 1
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Hamilton provides Internet and website support services to its customers. On 1st May 20X7, Hamilton agreed a 3-year support service agreement with a customer at a total price of $2250.
How much revenue can be recognised from this transaction for the year ended 31 March 20X7?
The answer provided is given as 2250/3=750
And revenue provided from 1 April- 31 Dec is 4/12 x 750= 250
Why are they taking 31 dec? And how does that make 4 months?
Please put some light into this answer!
I wonder if there is some misprinting..
October 5, 2016 at 2:24 pm #342456
John Moffat
Keymaster
- Topics: 57
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Either you have typed the question wrongly, or there is a misprint in your book.
Since the agreement did not start until 1 May 20X7 (which is after 31 March 20X7) no revenue should be recognised for the year ended 31 March 20X7!!
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