Carthage Caravans rents storage units. In the ﬁrst month of operation, they collected cash and credit card receipts of $4,140 and during the month they rented thirty-six (36) storage units. All storage units rent out at $115.00 per month. They also received non-refundable deposits of $23.00 each on another ﬁve storage units. For two of those deposits the customers had not shown up, and the company did not refund the deposits; the other three deposits were for the following month. The appropriate amount for them to recognize as revenue for their ﬁrst month is:

Question

Quizplus · Accepted Answer

Revenue recognition principles dictate that revenue is recognized when earned, regardless of when the cash is received. In this case, Carthage Caravans earned revenue from renting out 36 storage units at $115 each, totaling $4,140. Additionally, they received non-refundable deposits for 5 units at $23 each, totaling $115. However, only the deposits for the two units where customers did not show up should be recognized as revenue in the first month, adding $46 to the $4,140, making the total revenue $4,186. The deposits for the next month's rentals should not be recognized as revenue in the first month.

Carthage Caravans Rents Storage Units