On April 1, Gallery Corp. entered into a two-month contract for $50,000. Gallery Corp. earned $25,000 of the contract in April and billed the customer. Gallery Corp. should recognize the revenue when it receives the customer's cheque.

Question

Quizplus · Accepted Answer

According to the revenue recognition principle, revenue is recognized when it is earned and realizable, regardless of when the cash is received. Since Gallery Corp. earned $25,000 of the contract in April and billed the customer, it should recognize the revenue in April, not when the cheque is received.