Chapter 3, Problem E3.18E

E3-18 Comparing cash and accrual basis accounting and applying the revenue recognition principle

Learning Objectives 1,2

Momentous Occasions is a photography business that shoots videos at college parties. The freshman class pays $1, 000 in advance on March 3 to guarantee services for its party to be held on April 2. The sophomore class promises a minimum of $2, 800 for filming its formal dance and actually pays cash of S4, 100 on February 28 at the dance.

Answer the following questions about the correct way to account for revenue under the accrual basis:

1. Considering the $1, 000 paid by the freshman class, on what date was revenue recognized? Did the recognition occur on the same date cash was received?
2. Considering the S4, 100 paid by the sophomore class, on what date was revenue recognized? Did the recognition occur on the same date cash was received?