Question

Momentous Occasions is a photography business that shoots videos at college parties. The freshman class pays $1,000 in advance on March 3 to guarantee services for its party to be held April 2. The sophomore class promises a minimum of $2,800 for filming its formal dance and actually pays cash of $4,100 on February 28 at the dance.a.Considering the $1,000 paid by the freshman class, on what date was revenue earned? Did the earnings occur on the same date the cash was received?b.Considering the $4,100 paid by the sophomore class, on what date was the revenue earned? Did the earnings occur on the same date cash received?

Answer 1

Answer:

a. The Date on which Revenue was earned is April 2.

The Cash was received on March 3 and Revenue was earned on April 2 so no the earnings were not received on the same date the cash was received.

b. The date revenue was earned was February 28.

The Cash was received on the February 28 and the Services were given on the February 28. So yes the earnings occur the same date the cash was received.

Explanation:

a.

To understand this let us create a Journal Entry for the transaction on March 3 first:

Debit: Cash $1,000

Credit: Services Payable $1,000

To record cash earned from the services payable.

At this time Momentu Occasions have earned the Cash but it cannot be recorded as revenue as the services are still a liability which are yet to be given.

Now lets record the Journal Entry from April 2:

Debit: Services Payable $1,000

Credit: Service Revenue $1,000

To record Revenue earned.

Now the Services Payable account will be canceled out and the revenue entry will be generated. Hence we can come to conclusion and drive our answers from it;

b.

For Sophomore Class the Journal entry can be recorded as follows on the February 28:

Debit: Cash $4,100

Credit: Service Revenue $4,100

To record Service given at Cash.