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Homework answers / question archive / According to the revenue principle, revenues should be recognized when they are earned, which happens when the company performs acts promised to the customer
According to the revenue principle, revenues should be recognized when they are earned, which happens when the company performs acts promised to the customer. For most businesses, this condition is met at the point of delivery of goods or services.
Required:
The following transactions occurred in September 2017. For each of the transactions, if revenue is to be recognized in September, indicate the amount.
1- Shaw Communications is scheduled to install digital cable at 1,050 homes during the month of September. The installation charge is $102 per home. The terms require payment within 30 days of installation. Answer from Shaw's standpoint.
2- Shaw receives payment from customers for the installations described in (c). Answer from Shaw's standpoint.
3- A customer purchases a ticket from WestJet in September for $510 cash to travel in December. Answer from WestJet's standpoint.
these are my questions
| Activity | Amount | Reason | |
| 1) | Installation of Cable (schedule) | $0 | No revenue will be recognized, because Shaw communications is just scheduling to install digital cable and actual installations haven't taken place. |
| 2) | Payment for installation of cable received | $0 | Since revenue has already been recognized when installation completed, receipt of payment has nothing to do with revenue recognition. |
| 3) | Purchase of ticket to travel in December | $0 | The service will be performed in December and therefore this will form part of unearned revenue and no revenue shall be recognized now. |
