Weather Accurate Inc. provides weather updates to various television stations. In lieu of cash payments, the television stations run various advertisements for Weather Accurate. Weather Accurate estimates that this advertising has a fair value of $1,000,000 a year and therefore records revenue for this amount. The television stations often have excess capacity, and therefore their cost for providing the advertising due to lost revenue is negligible.
(a) Explain this type of revenue recognition transaction.
(b) What factors should be considered in determining when to recognize revenue in this transaction?
(c) Prepare the journal entry that Weather Accurate should make to record revenue related to its receipt of this advertising on the television stations.