Angelo's charges $240 per month for catering services. In the first quarter of the year, they collected $16,800. Fifteen customers pre-paid for three months of catering beginning in January, ten customers pre-paid for two months of catering beginning in February, and five customers paid for one month of catering in March. Using the cash basis of accounting, Angelo's will recognize ________ in revenue for February and ________ using the accrual basis.
A) $0; $3,600
B) $4,800; $6,000
C) $3,600; $7,200
D) $4,800; $0

Question

Quizplus · Accepted Answer

Under the cash basis, revenue is recognized when cash is received. In February, 10 customers pre-paid for two months, so $4,800 is recognized. Under the accrual basis, revenue is recognized when earned. In February, 15 customers are in their second month and 10 customers in their first month, totaling $6,000.

Angelo's Charges $240 Per Month for Catering Services