On 7/31/19, Bartley Company signed a two-year software usage contract for $7,200,000 for the period 8/1/19 through 7/31/21. The customer paid the entire $7.2M on 7/31/19 and the payment is non-refundable. Bartley concluded that the ongoing cost of the obligation to deliver this software was zero.

Assume that Bartley Company had never been acquired. At 12/31/20 and for the year ended 12/31/20 what should the year end liability for deferred revenue and the revenue recognized for the year be:

12/31/20 deferred revenue 2020 recognized revenue

1. $7.2 million None
2. None None
3. $5.7 million $1.5 million
4. $2.1 million $3.6 million
5. None of the above