Question

In 2018, Ginzel Corporation agreed to provide a client with 20 detailed marketing analyses of its client’s key products for a total fee of $110,000. The fee was computed as $5,000 per report x 20 reports = $100,000, plus $10,000 to extract the necessary data from the client’s system and convert it into the format Ginzel needs to do the analysis. It cost Ginzel $4,000 to complete the data extraction and conversion. As of December 31, 2018, Ginzel has completed the conversion of the data and has completed and delivered 7 of the 20 marketing reports to the client.

Required: How much revenue should Ginzel recognize in 2018?

How should Ginzel account for the $4,000 in costs it incurred to extract and convert the client’s data?

	2018 1. Ginzel recognizes 2a. Asset reported at December 31, 2018 2b. Expense to be recognized in 2018

Answer 1

Ginzel Corporation agreed to provide a client with detailed marketing analyses of its client’s key products

Particulars	Amounts$
Fees for 01 Report	5,000
Fees for 20 reports (20reposts * 5000)	1,00,000
Extracting data and reporting as per requirement	10,000
Total revenue from this job	1,10,000
Cost of Data Extraction and Conversion	4,000

Particulars	Amounts$
Revenue for 7 out of 20 reports	35,000
Fees for extracting & conversion the necessary data	10,000
Total Revenue for 2018 year	45,000
Less: Cost of Data Extraction and Conversion	4,000
Profit for the current year	41,000

Notes

As per given data  Ginzel has completed the conversion of the data. Therefore costs incurred for data extraction and conversion was charged and fees against such work $ 10,000 was booked as revenue for the current year.

2a. In the given question the client has not paid anything till the end of year.

Asset = Account Receivable

= (7*5,000)+10,000

= $ 45,000

2b. costs for data extraction and conversion (since completed) = $ 4,000

Alterenativel:

Since terms of contract not provided

Assumed that $10,000 fess was recorded as revenue proportionately for reports given

Total Revenue for Year = 7*5,000 +(10,000*7/20) = $38,500

Asset receivable = 38,500

Cost incurred = 4,000