NSC | Revenue Recognition Method: Straight-line, prorate first & last period (period-rate)
When Straight-line, prorate first & last period (period-rate), even amounts are allocated to the in between periods while the first and final periods based on the number of days are prorated. Here is an example of an allocation Revenue Plan with $10,000 revenue amount.
Start Date: February 11, 2022
End Date: May 27, 2022
1. Divide the number of revenue days days (days within the start and end date) over the number of days in that month.
2. Add all the rates computed in (1).
3. Divide the Transaction total to the sum computed in (2).
4. Multiply the amount computed in (3) to the rates computed in step (1) to know the corresponding amounts to allocate for the periods.
Patrick Fresnosa | Advanced Accounting | SRP | Ask a Guru