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3 July, 14:18

Sheridan, a lawyer, accepts a legal engagement in March, performs the work in April, and is paid in May. In completing the engagement, Sheridan pays no costs in March, $2,590 in April, and $3,090 in May (incurred in April). How much expense should the firm deduct from revenues in the month when it recognizes the revenue?

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  1. 3 July, 16:02
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    The $5,680 expense should the firm deduct from revenues in the month when it recognizes the revenue.

    Explanation:

    According to the matching accounting principles, the expenses and revenues should be recorded in that period in which they are incurred and earned.

    In the question, the Sheridan pays $2,590 in April, and $3,090 in may but it incurred in April

    So, the total amount would be $2,590 + $3,090 = $5,680 should be recorded on April month only.
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