sells subscriptions for for months. The company collects cash in advance and then subscribers have access to unlimited movies each month. Apply the revenue recognition principle to determine a. when should record revenue for this situation. b. the amount of revenue should record for months.

First part of the question is:

Movies Online sells subscriptions for $36 for 18 months.

a. Apportion revenue to each month.

Going by the Revenue Recognition principle, revenue should only be recognized when the service has been delivered. Seeing as the service is monthly, the company should find out the total revenue for the 18 months and then apportion this to each of those 18 months and recognize a monthly revenue at the end of each month.

b. Amount of revenue for 8 months:

First find the revenue per month:

= Total revenue / 18 months

= 36 / 18

= $2 per month

Revenue for 8 months:

= 2 * 8

= $16

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