b - rides, incorporated, manufactures bicycles that can fold to a compact size. on march 15, the company…
b - rides, incorporated, manufactures bicycles that can fold to a compact size. on march 15, the company receives a large order from a big box specialty retailer. due to the size of the order, b - rides required this customer to pay $1,000 immediately, reflecting a 10 percent down payment. the remaining balance of $9,000 was received from the customer in april (the following month) at delivery. required: 1. how much revenue should be recognized in march? 2. how much deferred revenue should be recognized in march? 3. how much revenue should be recognized in april? 4. how much deferred revenue should be recognized in april?
Answer
Explanation:
Step1: Revenue recognition principle
Revenue is recognized when the performance obligation is satisfied. In March, the product is not delivered, so no revenue is recognized. 0
Step2: Deferred revenue in March
The $1,000 received in March is a down - payment and is considered deferred revenue as the performance obligation (delivery of bicycles) is not met yet. $1,000
Step3: Revenue in April
In April, the bicycles are delivered, so the full amount of the order ($1,000 + $9,000=$10,000) is recognized as revenue. $10,000
Step4: Deferred revenue in April
The deferred revenue of $1,000 from March is now recognized as revenue in April, so the deferred revenue in April is $0. $0
Answer:
- $0
- $1,000
- $10,000
- $0