contestada

ABC Hotels, Inc. has signed a service outsourcing contract with XYZ Rooms, Inc. for $5 million, which was received in cash at contract inception. Under the agreement, XYZ Rooms is obligated to clean and prepare over 5,000 hotels rooms managed by ABC Hotel on a daily basis from November 1, 2018 to July 31, 2019. Required: Prepare any journal entry that XYZ would record: (1) at inception of the contract and (2) at the end of 2018 to recognize all revenue associated with this contract that should be recognized in 2018.

Respuesta :

letmeanswer

Solution:

(1) at inception of the contract and

August 1, 2018: Cash                        3,000,000

                                 Deferred revenue           3,000,000

(2) at the end of 2018 to recognize all revenue associated with this contract that should be recognized in 2018.

December 31, 2018:   Deferred revenue        1,250,000

                                              Revenue                       1,250,000

The journal entries with regarding to the inception of the contract and the revenue recognition as follows:

(1) at the inception of the contract and

August 1, 2018: Cash                        3,000,000

                              Deferred revenue           3,000,000

Here cash is debited since it increased the cash and credited the deferred revenue.

(2) at the end of 2018

December 31, 2018:   Deferred revenue        1,250,000

                                             Revenue                       1,250,000

Here the deferred revenue is debited and credited the revenue since it increased the revenue.

Learn more about revenue here: https://brainly.com/question/20048180

Otras preguntas