Your business exchanged accounting services, worth $30,000, to Luna Inc. for equipment worth $15,000 at the...

Your business exchanged accounting services, worth $30,000, to Luna Inc. for equipment worth $15,000 at the date of the exchange. How much revenue should your business report as a result of the transaction?

$45,000

$0 because no cash was paid.

$30,000

$15,000

Expert Solution

The correct answer is $30,000.

Supporting explanations:

Revenue consideration should be done based on the fact that how much worth of services are provided and the services may be provided in exchange for any asset like cash, or equipment or machinery or on account (accounts receivable) but this is not relevant in revenue recognition because total worth of services provided is already done so the worth of $30,000 should be recognized as revenue earned and the journal entry that is required to record this transaction is shown below in order to give the full clarity.

Journal Entry:

Account Titles and Explanation	Debit	Credit
Equipment	$15,000
Accounts Receivable or Cash ($30,000 - $15,000)
Service Revenue		$30,000
(To record the services provided in exchange for equipment and the balance for cash or on account)
Note: If the company receives the cash then cash is debited but if it will receive it in future period then accounts receivable is debited.

ekkarill92 answered 1 year ago

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