On December 31,Year 1,a Company Signed a One-Year Contract to Provide

question 193

Multiple Choice

On December 31,Year 1,a company signed a one-year contract to provide services to a particular customer for $12,000.The customer will pay for the services during January Year 2.Using the accrual basis of accounting,when should the company recognize revenue?

• A) in January Year 2, when the cash is received
• B) on December 31, Year 2, after all services have been provided
• C) equally throughout Year 2, as the revenue is earned
• D) on December 31, Year 1, when the contract is signed

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Definitions:

Private Sector

The part of the economy that is owned and operated by individuals and companies for profit, as opposed to the state.

Information Difficulties

Challenges encountered in obtaining, processing, or understanding necessary information, often affecting decision-making processes.

Government Intervention

Involves the actions taken by government or public authorities to influence the workings of the market economy.

Adverse Selection Problem

A situation in markets where buyers and sellers have asymmetric information, leading to high-quality goods or services being ousted by lower-quality ones.