(L. OBJ. 1, 2) Comparing accrual and cash basis accounting, and applying the revenue principle [5—10 min]
Captured Moments is a photography business that shoots videos at college parties. The freshman class pays $110 in advance on January 3 just to guarantee your services for its party to be held February 2. The sophomore class promises a minimum of $300 for filming its formal dance, and actually pays cash of $440 on January 28 at the party.
Requirements
1. Answer the following questions about the correct way to account for revenue under the accrual basis,
a. Considering the $110 paid by the freshman class, on what date was revenue earned? Did the earnings occur on the same date cash was received?
b. Considering the $440 paid by the sophomore class, on what date was revenue earned? Did the earnings occur on the same dare cash was received?
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