Answers
a)The Tables shows that the revenue is not equally recognized over the period two years it means some period is covered in year 2019 and some in 2020
Now Since 2020 is a complete period of 12 months ,it means Revenue earned per month = 540000/ 12 = $ 45000
So it means revenue recognized in 2021 covers number of months equals to :Total revenue recognized = revenue per month *number of months
225000 = 45000*n
n= 225000/45000
= 5 months
So revenue of 5 months of 2021 represent period ending 1Jan 2021 -31May 2021 .
The period of contract of 2 years ends on 31 May 2021 so it means the contract is entered on 31 May 2021 -2 years = 1June 2019
DATE OF CONTRACT : 06/01/2019
b)The contract was entered on 1 June 2019 ,it means seven months of unearned contract revenue received is earned in 2019 (1June 2019-31Dec 2019)
Contract price =Liability at year end 2019+ total contract revenue earned over 7 months
= 765000+ (45000 *7)
= 765000 + 315000
= $ 1,080,000
c)Deferred revenue refers to amount received in advance but not yet earned and same is recognized over the period of contract as and when services are provided /sale is completed .
So,The situation is a case of Deferred revenue where the contract revenue was received in advance and same should be recognized over the period of 2 years however the adjustment made in the current situation was not correct.
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