Question

On January 15, 2021, Bella Vista Company enters into a contract to build custom equipment for ABC Carpet Company. The contract specified a delivery date of March 1. The equipment was not delivered until March 31. The contract required full payment of $75,000 30 days after delivery. The revenue for this contract should be ________.

a. recorded on April 30, 2021.b. recorded on March 31, 2021.c. recorded on January 15, 2021.d. recorded on March 1, 2021.

Answer 1

B) recorded on March 31, 2021.

Step-by-step explanation:

According to the accrual accounting system, revenues and expenses must be recorded on the actual periods that they occur and not when they are collected (revenues) or paid for (expenses). In this case, the earning process was completed on March 31, so the revenue must be recorded on that date.

The journal entry should be:

Dr Accounts receivable 75,000

Cr Sales revenue 75,000