In the month of March the Digby Corporation received and delivered orders of 152

Question

In the month of March the Digby Corporation received and delivered orders of 152,000 units at a price of $15.00 for revenue of $2.280mil for their product Dixie. Digby uses the accrual method of accounting and offers 30 day credit terms. By the end of May Digby had collected payments of $2.280mil for the March deliveries. How much of the collected $2.280mil should Digby show on the March 31st income statement and how much on the May 31st income statement?
Select 1:
A) $2.280mil in March; $0 in May B) $1.140mil in March; $1.140mil in May C) $0.752mil in March; $1.528mil in May D) $0 in March; $2.280mil in May In the month of March the Digby Corporation received and delivered orders of 152,000 units at a price of $15.00 for revenue of $2.280mil for their product Dixie. Digby uses the accrual method of accounting and offers 30 day credit terms. By the end of May Digby had collected payments of $2.280mil for the March deliveries. How much of the collected $2.280mil should Digby show on the March 31st income statement and how much on the May 31st income statement?
Select 1:
A) $2.280mil in March; $0 in May B) $1.140mil in March; $1.140mil in May C) $0.752mil in March; $1.528mil in May D) $0 in March; $2.280mil in May In the month of March the Digby Corporation received and delivered orders of 152,000 units at a price of $15.00 for revenue of $2.280mil for their product Dixie. Digby uses the accrual method of accounting and offers 30 day credit terms. By the end of May Digby had collected payments of $2.280mil for the March deliveries. How much of the collected $2.280mil should Digby show on the March 31st income statement and how much on the May 31st income statement?
Select 1:
A) $2.280mil in March; $0 in May B) $1.140mil in March; $1.140mil in May C) $0.752mil in March; $1.528mil in May D) $0 in March; $2.280mil in May A) $2.280mil in March; $0 in May B) $1.140mil in March; $1.140mil in May C) $0.752mil in March; $1.528mil in May D) $0 in March; $2.280mil in May

Explanation / Answer

The accrual method of accounting states that revenue is recognized in the period in which it is earned and not when the actual cash is received. Hence, the 31st March income statement will recognize the entire revenue of $ 2.28 million and the 31st May income statement will not recognize any part of the aforementioned revenue.

Hence, the correct option is (A).

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