Question

28. David is in the business of sharpening skates for college hockey teams. He signed a contract on August 1, 2019 for $28,000 with Bentley University ("Bentley") to sharpen the team’s skates for the 2019-2020 hockey season, which is played from the months of September 2019 through March 2020. The contract states that Bentley will pay David a deposit of $8,000 on August 31, 2019, $8,000 on October 31, 2019, $4,000 on December 31, 2019 and the remaining $8,000 on March 31, 2020. David performed the services as contracted throughout the hockey season. What was the amount of revenue David should recognize for year-end December 31, 2019 on the Bentley contract? A. $0 B. $16,000 C. $20,000 D. $28,000

Answer 1

The correct answer is:

$20,000 (C.)

Step-by-step explanation:

To calculate the revenue recognized for the year-end on the contract, the earnings and the period will be written out clearly as follows:

Total worth of contract = $28,000

August 31, 2019 revenue = $8,000

October 31, 2019 revenue = $8,000

December 31, 2019 revenue = $4,000

March 31, 2020 revenue = $8,000

Therefore, revenue recognized for year-end December 31, 2019 on the Bentley contract is the total revenue received between August and December 2019, and it is calculated below as:

8,000 + 8,000 + 4,000 = $20,000