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Rothbart Manufacturing agrees to manufacture bumper cars for 12 Banners Amusement Parks. Under the terms of the contract, 12 Banners will pay Rothbart a total of $63,000, and 12 Banners can cancel the contract if it so chooses but must pay Rothbart for work completed. Rothbart believes that, if 12 Banners cancelled the contract, Rothbart could sell the bumper cars to another amusement park and still make a profit. The manufacturing contract is expected to last six months, and as of December 31, 2021, the job is 80% complete. How much revenue should Rothbart recognize in 2021 for this contract

Respuesta :

anthougo

The revenue that Rothbart Manufacturing should recognize in 2021 for the contract is $50,400.

Data and Calculations:

Contract value = $63,000

Contract period = 6 months

Percentage of contract on December 31, 2021 = 80%

  • Revenue to be recognized for 2021 = $50,400 ($63,000 x 80%)

Thus, based on the contract terms that 12 Banners could cancel the manufacturing contract, and pay based on the percentage of work completed, the revenue that Rothbart Manufacturing should recognize for 2021 is $50,400.

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