Answer:
The amount of revenue in 2021 is $84000
Step-by-step explanation:
The contract signed is for a period of 12 months with 8 months in the year 2021 and 4 months in the year 2022.
As a result 8 months worth of revenue should be recognized in the year 2021,hence revenue recognizable in 2021 is calculated thus:
8/12*$126000=$84000
The required entries in the books at the end of 2021 would look like the below:
Dr Cash $126000
Cr Revenue $84000
Cr Deferred revenue $42000
In the year 2022 the required entries to recognize the balance of $42000 in revenue is shown thus:
Dr deferred revenue $42000
Cr revenue $42000
The whole $126000 cannot be shown in 2021 as revenue as accrual basis of accounting has been adopted even though the whole amount was received in 2021