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M3-3 Identifying Accrual Basis Revenues [LO 3-2] The following transactions are July activities of Bill’s Extreme Bowling, Inc., which operates several bowling centers

M3-3 Identifying Accrual Basis Revenues [LO 3-2] The following transactions are July activities of Bill’s Extreme Bowling, Inc., which operates several bowling centers. If revenue is to be recognized in July, indicate the amount.






  a. Bill's collected $21,600 from customers for services related to games played in July. 

  b. Bill's billed a customer for $355 for a party held at the center on the last day of July. The bill is to be paid in August.

  c.The men's and women's bowling leagues gave Bill's advance payments totaling $1,750 for the fall season that starts in September.

  d.Bill's received $1,300 from credit sales made to customers last month (in June).


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Answer #1

Answer

  • When applying accrual method for recognising Revenues, it is recognised when the revenue is ACTUALLY EARNED. Whether cash has received or not is not of importance so far as revenue recognition is concerned.
  • Revenue is to be recorded in a period it is EARNED.
  • Answer

Amount of revenue

Reason

a

$21,600

Revenue earned in July and received in July

b

$355

Revenue earned in July, to be received in Aug

c

$0

Revenue received in July, to be earned in September

d

$0

Revenue received in July, earned in June

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