Angelo's charges $280 per month for catering services. In the first quarter of the year they collected $19,600. 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 March and ________ using the accrual basis.
A) $0; $1,400
B) $8,400; $1,400
C) $1,400; $0
D) $1,400; $8,400

Question

Quizplus · Accepted Answer

Under the cash basis, revenue is recognized when cash is received. In March, five customers paid for one month, totaling $1,400 (5 x $280). Under the accrual basis, revenue is recognized when earned. In March, revenue from fifteen customers for March ($4,200) and ten customers for March ($2,800) and five customers for March ($1,400) is recognized, totaling $8,400.

Angelo's Charges $280 Per Month for Catering Services