Question

Kerianne paints landscapes, and in late 2018 placed four paintings with a retail price of $250 each in the Holmstrom Gallery. Kerianne's arrangement with Holmstrom is that Holmstrom will earn a 20% commission on paintings sold to gallery patrons. As of December 31, 2018, one painting had been sold by Holmstrom to gallery patrons. How much revenue with respect to these four paintings should Kerianne recognize in 2018?

Answer 1

Kerianne should recognize a revenue of $950 in 2018 for the four paintings placed in the Holmstrom Gallery.

Step-by-step explanation:

To calculate the revenue that Kerianne should recognize in 2018 for the four paintings placed in the Holmstrom Gallery, we need to consider the retail price of the paintings and the commission rate agreed upon with the gallery. The retail price of each painting is $250. Since there were four paintings in total, the total retail price is 4 x $250 = $1000. The arrangement with the gallery states that they earn a 20% commission on paintings sold to gallery patrons. Since one painting was sold by Holmstrom to gallery patrons, the commission earned by the gallery is 20% of $250 = $50. Therefore, the revenue that Kerianne should recognize in 2018 for these four paintings is the total retail price minus the commission earned by the gallery, which is $1000 - $50 = $950.