Question

Tony's tune-up shop ltd. follows the revenue recognition principle. tony services a car on may 31. the customer picks up the vehicle on june 1 and mails the payment to tony on june 5. tony receives the cheque in the mail on june 6. when should tony show that the revenue was earned?

a. june 1
b. may 31
c. june 5
d. june 6

Answer 1

Tony should show that the revenue was earned on May 31.

Step-by-step explanation:

The revenue recognition principle states that revenue should be recognized when it is earned, not when the payment is received. In this case, Tony services the car on May 31, so that is when the revenue is earned. Tony's Tune-Up Shop Ltd. follows the revenue recognition principle, which states that revenue should be recognized when it is earned, regardless of when the payment is received. The customer picking up the vehicle on June 1 or mailing the payment on June 5 does not impact when the revenue is recognized.

Tony should show that the revenue was earned on May 31, option b.