Financial statements of toms terrific technologies

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Reference no: EM13747250

Tom’s Terrific Technologies provides maintenance service for office equipment and computers for companies located in the Pacific Northwest. The fiscal year-end for this company is December 31st. On December 30, 2014, Sally Seller, the sales manager, finalized a five-year maintenance contract for $500,000. Sally is thrilled because this $500,000 contract enables her to hit the income target for her annual bonus. The contract requires the customer to pay $100,000 on December 30, 2014, the day the contract is signed. In addition, the customer is required to pay $100,000 on December 30, 2015, 2016, 2017, and 2018. Discuss the effect that this event will have on the financial statements of Tom’s Terrific Technologies, which uses accrual accounting. Discuss how this contract will affect Sally’s bonus.

Reference no: EM13747250

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