Prepare the journal entry using revenue recognition.
Prepare the
During 2023, one of our construction customers asked us to do something we haven’t done before. In addition to building an apartment building, they asked us to cover the building maintenance on a separate building over a period of two years. We agreed as this helped us gain the construction portion of the contract. Construction of the building was finished by the end of the fiscal year, but the two-year maintenance contract extends to the end of June 2025. The total value of the contract was $850,000 and WC’s management estimates that a similar maintenance contract would be sold for approximately $110,000 and the standalone construction would have been $740,000. We have done separate maintenance contracts as a standalone service in the past. As of now, the full $850,000 is recorded as revenue for the 2023 fiscal year.
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