Chapter 5 Day 1-2 - Brief Exercise 53 This contract...

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Brief Exercise 5–3 This contract qualifies for revenue recognition over time, because the performance obligation (to provide technology consulting services upon request) is consumed by the customer as the seller’s work is performed. Therefore, Varga should recognize revenue of $4,000 ($6,000 × 8/12 months) in 2016. Journal entries (not required): May 1, 2016 Cash 6,000 Deferred revenue 6,000 December 31, 2016 adjusting entry Deferred revenue 4,000 Service revenue ($6,000 x 8/12) 4,000 Brief Exercise 5–5 Number of performance obligations in the contract: 1 . Access to eLean services is one performance obligation. Registration on the website is not a performance obligation, but rather is part of the activity eLean must provide to satisfy its performance obligation of providing access to eLean’s on-line services. The $50 payment is an upfront payment that is part of the total transaction price associated with the service, and the monthly payments are the other component.
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Brief Exercise 5–7 Number of performance obligations in the contract: 2 .
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