Question

Problem 5-1A Calculate the amount of revenue to recognize (LO5-1)

Assume the following scenarios.
   
Scenario 1: During 2021, IBM provides consulting services on its mainframe computer for $11,000 on account. The customer does not pay for those services until 2022.
  
Scenario 2: On January 1, 2021, Gold’s Gym sells a one-year membership for $1,200 cash. Normally, this type of membership would cost $1,600, but the company is offering a 25% “New Year’s Resolution” discount.
  
Scenario 3: During 2021, The Manitowoc Company provides shipbuilding services to the U.S. Navy for $450,000. The U.S. Navy will pay $150,000 at the end of each year for the next three years, beginning in 2021.
  
Scenario 4: During 2021, Goodyear sells tires to customers on account for $35,000. By the end of the year, collections total $30,000. At the end of 2022, it becomes apparent that the remaining $5,000 will never be collected from customers.

Answer 1

	Revenue recognized in 2018
Scenario 1	$11000
Scenario 2	$1200 (1600*(1-25%))
Scenario 3	$450000
Scenario 4	$35000

According to revenue recognition principle, all those revenues that are earned should be recognized irrespective of time they are actually received.