Asked by Razmin Ellazar on Jul 16, 2024
Verified
Justice Company and League Company equally share the output of their joint operation. The joint operation paid a service fee of $60 000 to Justice Company during the current period. The cost incurred by Justice Company to supply the service was $48 000. Justice Company records the service fee revenue as:
A) DR Cash $60 000 CR Fee revenue $60 000
B) DR Cash $48 000 CR Fee revenue $48 000
C) DR Cash $30 000 CR Fee revenue $30 000
D) DR Cash $24 000 CR Fee revenue $24 000
Service Fee Revenue
Income earned by a company for the provision of services to customers or clients.
Supplying Service
The act of providing services to clients or customers, as opposed to delivering physical goods.
Cost
The amount of money spent on the production or acquisition of a good or service.
- Understand thoroughly the accounting strategies for contributions and transactions in joint operations, considering initial recognition, the acknowledgment of profits, depreciation, and their implications on financial statements.
- Discern the accounting outcomes resulting from the delivery of services in joint operations and the annulment of unrealized revenues.
Verified Answer
BY
Bruce YeungJul 21, 2024
Final Answer :
A
Explanation :
Justice Company would record the full amount of the service fee received ($60,000) as revenue, reflecting the total cash received for the service provided. The cost to supply the service ($48,000) would be recorded separately as an expense, not affecting the revenue recognition.
Learning Objectives
- Understand thoroughly the accounting strategies for contributions and transactions in joint operations, considering initial recognition, the acknowledgment of profits, depreciation, and their implications on financial statements.
- Discern the accounting outcomes resulting from the delivery of services in joint operations and the annulment of unrealized revenues.
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