une 1, Year 1 Oxian Corp. receives $24,000 from a customer for work to be performed evenly over the next 2 years. What is the amount of revenue that Oxian should recognize on the December 31 income statement for Year 1

$12,000

Explanation:

It is important to remember that revenue is recognized when entity transfers control of a good or a service.

It is also important to remember that revenue can be recognized at a point in time or over time. In our scenario revenue is recognized over time that is over a period of 2 years.

By 31 December, Year 1, using the output method, 1 years work would have been completed and that is the revenue that will be recognized.

Thus recognize (1/2 × $24,000) $12,000 for 1 year`s work completed and transferred to customer over time.

$6,000

Explanation:

journal entry to record deferred revenue:

June 1, year 1, deferred revenue received from customer X

Dr Cash 24,000

    Cr Deferred revenue 24,000

the adjustment entry made to recognize revenue:

December 31, year 1, accrued revenue

Dr Deferred revenue 6,000

    Cr Service revenue 6,000

Accrued revenue = ($24,000/24 months) x 6 months = $6,000