In: Accounting
Clark Bell started a personal financial planning business when
he accepted $55,000 cash as advance payment for managing the
financial assets of a large estate. Bell agreed to manage the
estate for a one-year period beginning June 1, Year 1.
Required
a. Show the effects of the advance payment and revenue recognition
on the Year 1 financial statements using a horizontal statements
model given below. In the Statement of Cash Flows column, use OA to
designate operating activity, IA for investing activity, FA for
financing activity, and NC for net change in cash. (Do not round
intermediate calculations. Enter any decreases to account balances
and cash outflows with a minus sign. Not all cells in the
"Statement of Cash Flows" column may require an input - leave cells
blank if there is no corresponding input needed.)
b. How much revenue would Bell recognize on the Year 2 income statement? (Do not round intermediate calculations and round your final answer to nearest whole number.
enue to be recognized in Year 2
c. What is the amount of cash flow from operating activities in Year 2?
|
ANSWER
a)
CLARK BELL PERSONAL FINANCIAL PLANNING | ||||||||
Horizontal Statements model for year 1 | ||||||||
Event | Balance Sheet | Income Statement | Statement of Cash Flows | |||||
Assets | =Liabilities | +Stockholders Equity | Revenue | -Expense | =Net Income | |||
Cash | Unearned Revenue | Retained Earnings | ||||||
Advance Payment | 55,000.00 | 55,000.00 | - | - | - | - | 57,000.00 | OA |
Revenue Earned | - | - 32,083.33 | 32,083.33 | 32,083.33 | - | 32,083.33 | - | NA |
b)
22,916.67
c)
0
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