Gary Smith signs a 1-year contract with Cullumber Video. The terms of the contract are that Gary is required to pay a nonrefundable initiation fee of $108. No annual membership fee is charged in the first year. After the first year, membership can be renewed by paying an annual membership fee of $6 per month. Cullumber determines that its customers, on average, renew their annual membership three times after the first year before terminating their membership. What amount of revenue should Cullumber recognize in its first year?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Gary Smith signs a 1-year contract with Cullumber Video. The terms of the contract are that Gary
is required to pay a nonrefundable initiation fee of $108. No annual membership fee is charged in
the first year. After the first year, membership can be renewed by paying an annual membership fee
of $6 per month. Cullumber determines that its customers, on average, renew their annual
membership three times after the first year before terminating their membership. What amount of
revenue should Cullumber recognize in its first year?
Revenue in first year
$
324
Transcribed Image Text:* Your answer is incorrect. Gary Smith signs a 1-year contract with Cullumber Video. The terms of the contract are that Gary is required to pay a nonrefundable initiation fee of $108. No annual membership fee is charged in the first year. After the first year, membership can be renewed by paying an annual membership fee of $6 per month. Cullumber determines that its customers, on average, renew their annual membership three times after the first year before terminating their membership. What amount of revenue should Cullumber recognize in its first year? Revenue in first year $ 324
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