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NSC | Revenue Recognition Method: How is Straight-line, prorate first and last period calculated?
Straight-line, prorate first and last period method is used to assign revenue in equal amounts for periods other than the first and final periods. Revenue Amounts are prorated for the first and last period based on the total number of days of the revenue recognition period.
Here is an example:
Start Date: February 11, 2022
End Date: May 27, 2022
1. Get the sum of the actual number of days that is inclusive of the Rev Rec start to end date.
2. Divide the total of the transaction amount over the amount in (1).
3. Use the actual number of days of the first month multiplied by the amount in (2) to get the amount to be recognized for the 1st month.