Momentous Occasion is a photography business that shoots videos at college parti

Question

Momentous Occasion is a photography business that shoots videos at college parties. The freshman class pays $1000 in advance on march 3 to guaranteeservices for its party to be held April 2. The Sophmore class promises a minimum of $2800 for filming its formal dance and actually pays cash of $4100 on February 28 at the dance.

Answer the following questions about the correct way to account for revenue under the acruel basis

a. Considering the $1000 paid by the freshman class, on what date was the revenue earned? Did the earnings occur the same date cash was received?

b. Considering the $4100 paid by the Sophmore class, on what date was the revenue earned? Did the earnings occur the same date cash was received?

Explanation / Answer

Sol.ution.

A. Payment received by freshman class of $1,000 is a unearned revenue and it is a libility. It can be consider as revenue at 2nd april.

No, Cash received cant't be treated as earning because service will not be provided still.

B. $4100 paid by the Sophmore class is treated as revenue at 28th Feb.

Yes, Earning was occure on same date when cash was received and service was provided.

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