Southern Light Containers charges $125 per month for a storage unit. In the first quarter of the year, they collected $6,125. 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 March and ________ using the accrual basis.
A) $0; $3,375
B) $625; $0
C) $1,250; $2,500
D) $625; $2,750

Question

Quizplus · Accepted Answer

The accrual basis recognizes revenue when it is earned, regardless of when cash is received. In March, Southern earned revenue from the five customers who paid for one month rental. Therefore, Southern will recognize $625 in revenue for March using the accrual basis.The cash basis of accounting recognizes revenue only when cash is received. In March, Southern received $625 from the five customers who paid for one month rental. Therefore, Southern will recognize $625 in revenue for March using the cash basis of accounting.

Southern Light Containers Charges $125 Per Month for a Storage