Question: please explain why we multiply by 8/12 On May 1, 2021, Varga Tech Services signed a $18,000 consulting contract with Shaffer Holdings. The contract requires
please explain why we multiply by 8/12
On May 1, 2021, Varga Tech Services signed a $18,000 consulting contract with Shaffer Holdings. The contract requires Varga to provide computer technology support services whenever requested over the period from May 1, 2021, to April 30, 2022, with Shaffer paying the entire $18,000 on May 1, 2021. How much revenue should Varga recognize in 2021? (Do not round intermediate calculation.) Revenue $ 12,000 Explanation This contract qualifies for revenue recognition over time, because the performance obligation (to provide technology consulting services upon request) is consumed by the customer as the seller's work is performed. Therefore, Varga should recognize revenue of $12,000 ($18,000 * 8/12 months) in 2021
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