Determine the revenue that novak will recognize in 2017

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Question

Novak's Agency sells an insurance policy offered by Capital Insurance Company for a commission of $99 on January 2, 2017. Novak will receive an additional commission of $8 each year for as long as the policyholder does not cancel the policy. After selling the policy, Novak does not have any remaining performance obligations.

Based on Novak's significant experience with these types of policies, it estimates that policyholders on average renew the policy for 4.5 years after the first year before terminating their insurance policy. It has no evidence to suggest that previous policyholder behavior will change.

Determine the revenue that Novak will recognize in 2017.

Reference no: EM132344685

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