Question

In the month of March the Digby Corporation received and delivered orders of 189,000 units at a price of $15.00 for revenue of $2.835mil for their product Deal. Digby uses the accrual method of accounting and offers 30 day credit terms. By the end of May Digby had collected payments of $2.835mil for the March deliveries. How much of the collected $2.835mil should Digby show on the March 31st income statement and how much on the May 31st income statement?

Answer 1

Answer:

$2.835 in March and $0 in May.

Explanation:

As per the data given in the question,

The actual method of accounting is that the revenue is not recognized in the period when the actual cash is received but the period in which it is earned.Hence, May-31 income statement will not recognize any part of revenue and March-31 income statement will recognize the whole revenue of $2.835 million.

Hence, $2.835 in March and $0 in May.