Question

On January 2, Main Company sells a video streaming device for $100. A one-year subscription to unlimited video streaming costs $150. Alternatively, customers can rent videos on demand or subscribe to a competing service. Customers may purchase the streaming device together with the one-year subscription for $200. Main should recognize revenue related to the video streaming device on

Answer 1

Revenue for the video streaming device should be recognized by Main Company on January 2 when the sale occurs, according to the revenue recognition principle in accrual accounting.

Step-by-step explanation:

The student's question is regarding when the Main Company should recognize revenue related to the sale of a video streaming device. According to the revenue recognition principle in accrual accounting, a business should recognize revenue when it is earned and realizable, regardless of when the payment is received. In the Main Company's case, if the video streaming device and the one-year subscription are sold as a single package for $200, and there is no stipulation for the services to be delivered over time or upon the occurrence of a future event, the company should recognize revenue when the sale occurs, which is on January 2.