The financial statement performed by Snell Corporation shows how the revenue recognition provides financial statement users(i.e. the client that uses Snell Co. service in May, June, and July) with relevant information regarding the services associated with revenue from customer contracts.
In the given case, the Snell Co. service charge was hiked in May since the entire service income must be accounted for in May. The amount owed from a client is seen as a current asset on the balance sheet, and once the amount is received from a client, it is removed off from the current asset. Thus it is added to the zero dollars ($0) company's cash balance. In this case, the cash collected in June and July is not recorded as revenue.
We can conclude that the monthly revenue recorded from Snell Co. performance and services for the client in May, June, and July for this service is as follows:
Months Revenue
May $1000
June 0
July 0
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Revenue is only earned after the required obligation (goods delivered or service rendered) has been fulfilled. From the question, we noted that Snell Co. performs and completes services for a client in May hence the revenue was earned in May irrespective of when money was received for the service rendered.
As such revenue earned in;
May is $1,000
June is $0
July is $0
for the service rendered
