In the month of March the Chester Corporation received and delivered orders of 182,000 units at a price of $15.00 for revenue of $2.730mil for their product Cedar. Chester uses the accrual method of accounting and offers 30 day credit terms. By the end of May Chester had collected payments of $2.730mil for the March deliveries. How much of the collected $2.730mil should Chester show on the March 31st income statement and how much on the May 31st income statement?

Question

05-12-2021
Business

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In the month of March the Chester Corporation received and delivered orders of 182,000 units at a price of $15.00 for revenue of $2.730mil for their product Cedar. Chester uses the accrual method of accounting and offers 30 day credit terms. By the end of May Chester had collected payments of $2.730mil for the March deliveries. How much of the collected $2.730mil should Chester show on the March 31st income statement and how much on the May 31st income statement?

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bhavish524 bhavish524 · Answer 1 · 2021-12-05T23:35:45-05:00

If all units were delivered by March 31st based on revenue recognition rules app 2.730 is recognizedas revenue in March with Dr accounts receivable and credit revenue.

When the funds are collect in may the accounts receivable is cleared to cash/Bank

Dr Bank and Cr accounts receivable

How ever since Chester Corp offers only 30 day credit terms the receivable is 30 days late they can Charge late payment fees and recognize the late fees as revenue in May i.e. the month the late fees is recognized

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