GMC sells cars and pays each salesperson a commission of $800 for each car sold. During the month of December, a salesperson, Tom, sold 3 new cars. GMC pays commissions on the 5th day of the month following the sale. Tom operates on the cash basis; the car dealer operates on the accrual basis. Which of the following statements is true?
A) Tom will recognize commission revenue earned in the amount of $2,400 in December.
B) GMC will recognize commission expense in the amount of $2,400 in December.
C) Tom will recognize commission expense in the amount of $2,400 in January.
D) Tom will recognize revenue in the same month that the car dealer recognizes expense.
Correct Answer:
Verified
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