In the scenario, you sell Netflix subscriptions. In January, you sell 5,000 subscriptions. In February, you sell
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Question:
In the scenario, you sell Netflix subscriptions. In January, you sell 5,000 subscriptions. In February, you sell an additional 5,000 subscriptions and in March, you sell another 5,000 subscriptions. Therefore, when working with revenue recognition, you must make sure to account for the new customers each month plus the recognition of revenue from the previous months.
- Calculate what the revenue would be on the Income Statement for January, February and March.
- Calculate what the deferred revenue would be on the Balance Sheet for January, February and March.
After working on the worksheet,
- Introduce to the concept of revenue recognition.
- Provide the results of the work you did and describe how you obtained those results?
- Explain what happens to revenue and deferred revenue as the months' progress?
- Explain when revenue can be recognized and why?
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