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On March 1st, Mr
On March 1st, Mr. Smithe signed up for a fitness program at Fit Co. and paid $960 for the entire program upfront. The program includes a total of 12 sessions and two sessions are delivered each month. How much revenue from Mr. Smithe should Fit Co. recognize at the end of March?
Expert Solution
Answer
$160
Explanation
Fit Co. should recognize $160 in revenue from Mr. Smithe. According to the revenue recognition principle, revenue is earned and recorded upon service completion, regardless of the timing of cash received. At the end of March, Fit Co. would have delivered two sessions out of the 12 sessions and therefore the revenue recognized would be calculated as: $960 x (2/12) = $160.
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