Question

In the month of March the Digby Corporation received and delivered orders of 173,000 units at a price of $15.00 for revenue of $2.595mil for their product Drat. Digby uses the accrual method of accounting and offers 30 day credit terms. By the end of May Digby had collected payments of $2.595mil for the March deliveries. How much of the collected $2.595mil should Digby show on the March 31st income statement and how much on the May 31st income statement

Answer 1

Answer: $2.595mil in March and $0 in May.

Explanation:

Digby Corporation uses the Accrual Method of Accounting. This method of Accounting posits that entries should be recorded only in the period that they were incurred regardless of when payment was received or made.

This means that if Revenue is received in a certain month but only paid for in another month,the accounting records will show the entire revenue amount on the original month.

In reference to Digby, they earned a revenue of $2.595 million in March and that is the amount that they will record as Revenue in March using Accrual Accounting.