Nate Beggs signs a 1-year contract with Tamarisk Video. The terms of the contract are that Nate is required to pay a non...
Nate Beggs signs a 1-year contract with Tamarisk Video. The
terms of the contract are that Nate is required to pay a
nonrefundable initiation fee of $84. No annual membership fee is
charged in the first year. After the first year, membership can be
renewed by paying an annual membership fee of $6 per month.
Tamarisk determines that its customers, on average, renew their
annual membership three times after the first year before
terminating their membership. What amount of revenue should
Tamarisk recognize in its first year?
| Revenue in first year |
Homework Answers
Amount of revenue required to be recognised in the first year is $84. Since, there is no contingency involved with regards to this amount. This revenue is not refundable. Further, there is no other amount required to be paid in the first year other than this. Hence, amount required to be recongnised is $84.
Irrespective of the fact whether the customer subscribes in the 2nd year or not, revenue for year 1 is not going to get affected. Hence, revenue required to be recognised is $ 84.
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