Question

In the Month of March, Chester received orders of 164 units at a price of $15.00 for their product Cute, and in April receives an order for 41 units of their product Cute at $15.00. Chester uses the accrual method of accounting and offers 30 day credit terms. Chester delivers 0 units in March, 164 units in April and 41 units in May. They received payment for 164 units in April, and payment for 41 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)

Answer 1

march: zero

april: 2,460

Step-by-step explanation:

Because Chester used accrual accounting, it will recognize the income when it is earned. Not before.

During March no unit was delivered, so no revenues is recognized

During April it delivers 164 units x 15 = $2,460 accrued revenue

unearned revenue 2,460 debit (it was previously collected)

earned revenue 2,460 credit