Question

On September 1, 2018, Great Lakes Equipment receives $24,000 from a customer for work to be performed evenly over the next 2 years. What is the amount of revenue that Great Lakes Equipment should recognize on the income statement for the year ending December 2018?

Answer 1

Answer:

$4,000

Explanation:

The computation of the equipment recognized on the income statement for the year ending December 2018 is shown below:

= Amount received from the customers ÷ Number of years

= $24,000 ÷ 2 years

= $12,000

This $12,000 is one year

Now for one months i.e from September 1 to December 31 is

= $12,000 ÷ `12 months × 4 months

= $4,000