Question

On March 1, 20x4, an appliance company sold a flat-screen TV for $8,000 along with a $600 service contract for any parts and labor on repairs not covered under the manufacturer's warranty for two years from the date of sale. Cash amounting to $8,600 was received at the time of sale. The customer took delivery of the TV on the date of the sale. Assume that historical experience has shown that service contract repairs occur evenly throughout the two-year life of the service contract. How much revenue, in total, should be recognized from this transaction during the year ending December 31, 20x4? 8,250 1,433 8,000 8,600 CIDO

Answer 1

Answer

Correct Answer is A. 8250. Sale price of the Flat - Screen TV is $8000 Service Contract period 24month i.e 2 year Value of service contract - 600 No. of months expired as on deceber 31 20x4 Revenue to be recongnised during the year ending december 31. 20x4 10 month 8250 =8000 + 600*10/24

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