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Spreadsheets Made Easy (SME) is a company that designs and sells spreadsheet software. Corporate customers purchase licences
Spreadsheets Made Easy (SME) is a company that designs and sells spreadsheet software. Corporate customers purchase licences for the number of users in their company who can access the software from their network at any time. The perpetual licences do not expire and can be easily reproduced by SME. SME has no additional obligations to fulfill with respect to this software. On 16 November 20X1, SME sold 50 licences to a customer for a total consideration of $50,000.
Required:
Prepare the journal entry that would be recorded by SME relating to this transaction.
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Expert Solution
The license fee revenue will be all immediately recognized since there are no further performance obligations to change the software in any way. In addition, the license is perpetual with no finite period. The entry for this sale will be:
16 November
Dr. Accounts Receivable 50,000
Cr. Revenue - software licenses 50,000
16 November
Dr. Accounts Receivable 50,000
Cr. Revenue - software licenses 50,000
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