Question

Morphe Cosmetics agrees to manufacture makeup palettes for Jaclyn Cosmetics. Under the terms of the contract, Jaclyn will pay Morphe a total of $60,000, and Jaclyn can cancel the contract if it so chooses but must pay Morphe for work completed. Morphe believes that, if Jaclyn cancelled the contract, Morphe could sell the palettes to another firm and still make a profit. The manufacturing contract is expected to last six months, and as of December 31, 2021, the job is 80% complete. How much revenue should Morphe recognize in 2021 for this contract

Answer 1

the revenue that should be recognized is $48,000

Step-by-step explanation:

The computation of the revenue that should be recognized is shown below;

= Total price of the contract × Percentage of completion of the contract

= $60,000 × 80%

= $48,000

By multiplying the total contract price with the percentage we can get the revenue recognized

hence, the revenue that should be recognized is $48,000