Deferred Revenue Question
I understand what is happening but am unsure how to phrase it in a concise way in an interview. The question is:
A company invoices a client for a research report for $100. It requires payment in month three and the report will be delivered in month four. Assume a tax rate of 20% and a cost of $80 (under COGS, not operating expenses).
I'll assume that the $80 is incurred entirely prior to month 3 when payment is received. Either way, this question reads like it's getting at the differences between cash and accrual accounting. Below is how I’d walk through it. It reads like longer than it actually is
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