Question

In June 2015, a public university bills and collects $45 million in tuition for the summer semester that runs from June 1 through July 15. In addition, in May and June it bills $300 million for the fall semester that runs from September 1 through December 15. Of this amount it collects only $120 million (expecting to collect the balance prior to September 1). In its statement of revenues, expenses, and changes in net position for the fiscal year ending June 30, 2015 it should recognize as tuition revenue

Answer is ​$30 million. Show how to get this answer and explain?

Answer 1

$30 million

Step-by-step explanation:

The university collected $45 million for the summer semester which runs from June 1 to July 15 ( a 45 day period).

The revenue recognition principle states that revenue should only be recognized when the earning process has been substantially completed.

Therefore, the university should recognize revenue proportional to the 30 days of June = ($45 million / 45 days) x 30 days = $30 million