For purposes of an example, let's say the life of the licensing agreement is one year, then SPZI would record $375,00 of revenue per quarter for the 4 quarters starting Q4 2007. Here are the quarterly journal entries per GAAP (B/S = Balance Sheet --- I/S = Income Statement):
Q4 2007
debit: Cash (B/S) $500,000
credit: Deferred Revenue (B/S) $500,000
debit: Amortization of Deferred Revenue (B/S) $375,000
credit: Revenue (I/S) $375,000
Q1 2008
debit: Cash (B/S) $500,000
credit: Deferred Revenue (B/S) $500,000
debit: Amortization of Deferred Revenue (B/S) $375,000
credit: Revenue (I/S) $375,000
Q2 2008
debit: Cash (B/S) $500,000
credit: Deferred Revenue (B/S) $500,000
debit: Amortization of Deferred Revenue (B/S) $375,000
credit: Revenue (I/S) $375,000
Q3 2008
debit: Amortization of Deferred Revenue (B/S) $375,000
credit: Revenue (I/S) $375,000
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