Oscars Environmental Services Inc. has a three-year contract to remove and recycle waste weekly from Ernies Ducky Factory Co. The contract requires payment at the beginning of each year. In the first year of the contract, Oscar's Environmental will incur approximately 80% of the cost of servicing Ernie's Ducky factory because it must construct a new recycling line to handle the waste from rubber ducky production. Ernies Ducky Factory Co. receives and consumes the benefits of each weekly garbage removal as each one is performed. Ernie's does not benefit from the recycling of its waste materials.

When should Oscars Environmental recognize revenue?

Oscars Hauling Inc. should recognize revenue over time because Ernies Ducky Factory Co. receives the benefits of each garbage removal service when it is performed.

Oscars Environmental should use the cost-plus-margin method to determine how much revenue to recognize.

Oscars Environmental should recognize revenue at a single point in time at the conclusion of the contract because Ernies Ducky Factory Co. receives the benefits of the garbage removal service at the conclusion of the contract.

Oscars Environmental should recognize revenue over time because the customer controls the asset as the seller creates it or enhances it over time.