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Consider the following three scenarios:I. ABC Lawncare performed lawn maintenance services for Drake Inc. on June 1st, and received payment of $500 for those services.II. On June 1st, Melly Corp received payment for 100 pounds of raw material to be delivered to Drake Inc. in 6 months.III. Lodo, LLC collected cash on June 1st for services rendered on May 1st.Given these scenarios, revenue cannot be recognized on June 1st for:

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Parrain

Answer:

  • Scenario II
  • Scenario III

Explanation:

The Accrual basis is used in Accounting which means that when it comes to revenue, it can only be recognized in the period that it is earned.

Scenario II cannot be recognized on June 1st because it is for goods to be delivered in 6 months. As the goods have not been delivered, the revenue has not be earned so will not be recognized.

Scenario III cannot be recognized on June 1st as well because it was for work done in May which means that it was earned in May. It is to be recognized as revenue earned in May, not in June.