July 1 is just the middle of the year, since the contracts were sold evenly during the year.

you can assume that 600,000 are sold at July 1 current

40% spent during the 1st year, then from July 1 current year to June 30 next year, is 40% of the contracts value will be recognized as revenue. that's $ 240,000.

and since we need the balance at 31 December current year, then only half of this amount is recognized, that is 240,000 / 2 = 120,000

120,000 of 600,000 is recognized as revenue, that makes deferred revenue = 600,000 - 120,000 = $480,000

I hope this helps

Thanks that helps but I guess my 'real' question is how was I supposed to know to assume that the contract was sold on July 1st - not Jan 1? What gives it away in the question?

Thank you so much for replying. I didn't think I was going to get a reply on a Saturday :)