Question

In the Month of March, Digby received orders of 136 units at a price of $15.00...

In the Month of March, Digby received orders of 136 units at a price of $15.00 for their product Dune, and in April receives an order for 34 units of their product Dune at $15.00. Digby uses the accrual method of accounting and offers 30 day credit terms. Digby delivers 0 units in March, 136 units in April and 34 units in May. They received payment for 136 units in April, and payment for 34 units in May. How much revenue is recognized on the March income statement from this order? How much in the April Income statement? (Answer in thousands)
Select: 1
$2,040 , $510
$2,550 , 0
0, $2,040

$850 , $850
Business   Finance   
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Homework Answers

Answer #1
As per Accrual method of accounting Revenue is recognised wen it is earned.
That means when they are realized or realizable. It is not important that wen cash is received.
Therefore, Revenue or sales is made on the day of Contract and not on the date when goods are
delivered or payment is received.
Revenue Recognized in the Month of March = 136 Units * $15 = $2040
Revenue Recognized in the Month of April = 34 Units * $15 = $510
Answer is 1. $2040, $510.
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