Southern Light Container Corp. charges $105 per month for a storage unit. In the first quarter of the year, they collected $5,145. Ten customers pre-paid for three months rental in January, seven customers pre-paid for two months rental in February, and five customers paid for one month rental in March. Using the cash basis of accounting, Southern will recognize ________ in revenue for February and ________ using the accrual basis.
A) $0; $735
B) $735; $1,470
C) $1,470; $1,785
D) $1,785; $2,520

Question

Quizplus · Accepted Answer

Under the cash basis, revenue is recognized when cash is received. In February, Southern Light Container Corp. received $735 from the seven customers who pre-paid for two months ($105 x 7). Under the accrual basis, revenue is recognized when earned. In February, they earned revenue from the ten customers for their second month ($105 x 10) and from the seven customers for their first month ($105 x 7), totaling $1,470.