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17 July, 17:51

Lewis Co. sold merchandise to AdCo for $43,000 and received $43,000 for that sale one month later. One week prior to receiving payment from AdCo, Lewis made a $9,000 payment to AdCo for advertising services that have a fair value of $5,000. After accounting for any necessary adjustments, how much revenue should Lewis Co. record for the merchandise sold to AdCo?

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  1. 17 July, 21:50
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    Revenue recognition = [Transaction price - (Payment to advertisement-fair value)

    Transaction price = $43,000

    Payment to advertisement = $9,000

    Fair value = $5,000

    Thus, the revenue should Lewis co. record for the merchandise sold to Adco is:

    = $43,000 - ($9,000 - $5,000)

    = $39,000
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