How much revenue is recognized in year one of the contract

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Question 1: An entity, a creator of comic strips, licenses the use of the images and names of its comic strip characters in three of its comic strips to a customer for a four-year term. There are main characters involved in each of the comic strips. However, newly created characters appear regularly and the images of the characters evolve over time. The customer, an operator of cruise ships, can use the entity's characters in various ways such as in shows or parades, within reasonable guidelines. The contract requires the customer to use the latest images of the characters. In exchange for granting the license, the entity receives a fixed payment of P1 million in each year of the four year term. The entity determines that the contract does not contain a significant financing component. How much revenue is recognized in Year 1 of the contract?

a. 1,000,000

b. 4,000,000

c. 3,169,865

d. 0

Reference no: EM132891145

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