Q1TIAT_3 - Horngren'S Financial And Managerial Accounting

Question

Before you begin this assignment, review the Tying It All Together feature in the chapter. Part of the Fry’s Electronics, Inc.’s experience involves providing technical support to its customers. This includes in-home installations of electronics and also computer support at their retail store locations.

Requirements 

3. What is the difference in how revenue is recorded in requirements 1 and 2? Clearly state when revenue is recorded in each requirement.

Step-by-Step Solution

Answer

In the first requirement, service revenue is recorded, and the second requirement records the unearned revenue. The service revenue will be recorded on the transaction date, and revenue in the second requirement revenue will be recorded in the future.

Step 1: Difference in recording the transaction

In requirement 1, cash is received in exchange for service provided by the business to the clients, and in requirement 2, cash is received for the service which is to be provided in the future. In the first requirement, cash is recorded for service revenue, and in the second requirement, cash is required for unearned revenue.

Step 2: Recording of the revenue

In the first requirement, revenue is recorded on the date of the transactions, but in requirement two, the revenue will be recorded when the business fulfills the contracts in the future.