Revenue and Expense Recognition Electronic Repair Company repaired a high-defini
ID: 2418791 • Letter: R
Question
Revenue and Expense Recognition Electronic Repair Company repaired a high-definition television for Sarah Merrifield in December 2013. Sarah paid $80 at the time of the repair and agreed to pay Electronic Repair $80 each month for 5 months beginning on January 15, 2014. Electronic Repair used $120 of supplies, which were purchased in November 2013, to repair the television. Assume that Electronic Repair uses accrual-basis accounting. In what month or months should revenue from this service be recorded by Electronic Repair? In what month or months should the expense related to the repair of the television be recorded by Electronic Repair? Conceptual Connection: Describe the accounting principles used to answer the above questions. The input in the box below will not be automatically graded, but may be reviewed and considered by your instructor.Explanation / Answer
1. In the books of electronic repair, the service revenue should be recorded in December 2013 ( accrual and realization principles)
2. The expense related to the repair should also be recorded in December 2013 ( matching principle).
3. The accrual principle requires revenues to be recorded and recognized in the period in which services are rendered, and the realization principle or the revenue recognition principle,which deals with timing of the recognition of revenues, requires that revenue be recognized in the period in which it is earned, provided that the amount of revenue can be measured reliably, there is no uncertainty as to the collectibility of the revenue, and the costs incurred for the transaction can be measured reliably.
The matching principle relates to expenses, and requires recording expenses in the same reporting period in which the revenues were earned as a result of the expenses.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.