In the Month of March, Digby Corporation received orders of 175 units at a price of...

In the Month of March, Digby Corporation received orders of 175 units at a price of $15.00 for their product Dim. Digby uses the accrual method of accounting and offers 30 day credit terms. Digby delivers 116 units in March and the balance of 58 units in April. They received payment for 58 units in March, 58 units in April, and 58 units in May. How much revenue is recognized on the March income statement from this order? How much in the April Income statement? (Answer in thousands)

	$2,625 , 0
	0 , $2,625
	$870 , $870
	$1,740 , $870

Solutions

Expert Solution

$2,625 , 0

Under accrual method of accounting, expenses are recorded when they are incurred regardless of when the payment is made, while revenue is recorded when they are earned, not considering the receipt of actual payment.

Therefore, in march when Digby received the order, the entire amount of sale will be recorded in the books as revenue.

i.e. 175 units x $15 = $2625

No revenue will be recognized in April i.e. 0

keosha answered 1 year ago

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