Kayamoto received P60,000 advance payment of his fee in January. In February, ½ of the amount is already earned, and ¼ earned in March and ¼ is to be returned to the customer because it could no longer be earned. How much is the correct revenue?Group of answer choicesP60,000 total earnings January to March in either accrual or cash basisP60,000 in January under accrual basisP15,000 in March under accrual basisP45,000 in February under cash basis
Question
Kayamoto received P60,000 advance payment of his fee in January. In February, ½ of the amount is already earned, and ¼ earned in March and ¼ is to be returned to the customer because it could no longer be earned. How much is the correct revenue?Group of answer choicesP60,000 total earnings January to March in either accrual or cash basisP60,000 in January under accrual basisP15,000 in March under accrual basisP45,000 in February under cash basis
Solution
The correct revenue can be calculated as follows:
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Kayamoto received an advance payment of P60,000 in January.
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In February, he earned half of this amount. So, the earned amount in February = 1/2 * P60,000 = P30,000.
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In March, he earned a quarter of the original amount. So, the earned amount in March = 1/4 * P60,000 = P15,000.
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However, a quarter of the original amount could not be earned and had to be returned to the customer. So, the returned amount = 1/4 * P60,000 = P15,000.
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Therefore, the correct revenue is the total amount received minus the amount returned. So, the correct revenue = P60,000 - P15,000 = P45,000.
So, the correct answer is P45,000.
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