Question

A. On October 1, Year 1, YD collected $24,000 for consulting services it agreed to provide during the coming year.

b. Adjusted the accounts to reflect the amount of consulting service revenue recognized in Year 1.

Required
a. Record the events under an accounting equation.
b. Prepare an income statement, balance sheet, and statement of cash flows for the 2013 accounting period.
c. Ignoring all other future events, what is the amount of service revenue that would be recognized in 2014?

Answer 1

A. Assets= Liabilities + S/E

Cash= Unearned revenue + Retained earnings

$24,000 = $18,000 + $6,000

Bi) Income statement $6,000

Bii) Balance sheet Total Asset $24,000

Balance sheet Total Liabilities $24,000

Biii) Ending Cash Balance $24,000

C. $18,000

Step-by-step explanation:

a. To Record the events under an accounting equation.

Event Assets= Liabilities + S/E

Cash= Unearned revenue + Retained earnings

Event $24,000 =$24,000 + $0

Adjustment. = -$6,000 + $6,000

$24,000 = $18,000 + $6,000

($24,000*3/12=$6,000)

($24,000*9/12=$18,000)

b) Preparation of an income statement, balance sheet, and statement of cash flows for the 2013 accounting period.

Bi)

Yard Designs INCOME STATEMENT

For the Year Ended December 31, 2013

Revenue $6,000

($24,000*3/12=$6,000)

Expense 0

Net Income $6,000

Therefore YD Income statement is $6,000

Bii)

Yard Designs BALANCE SHEET as of december 31, 2013

ASSETS

Cash $24,000

Total Assets $24,000

LIABILITIES

Unearned Revenue $18,000

($24,000*9/12=$18,000)

Total Liabilities $18,000

STOCKHOLDERS’ EQUITY

Retained Earnings $6,000

($24,000*3/12=$6,000)

Total Stockholders’ Equity $6,000

TOTAL LIAB. AND STOCKHOLDERS’ EQUITY $24,000

($18,000+$6,000)

Therefore YD Balance Sheet As Of December 31, 2013 will be :

Total Assets $24,000

Total Liabilities $24,000

Biii)

Yard Designs STATEMENT OF CASH FLOWS

For the Year Ended December 31, 2013

Cash Flows From Operating Activities:

Cash Receipt from Revenue $24,000

Net Cash Flow from Operating Activities $24,000

Cash Flows From Investing Activities $0

Cash Flows From Financing Activities:

Net Change in Cash $24,000

Plus: Beginning Cash Balance $0

Ending Cash Balance $24,000

Therefore YD statement of Cash flow ending Cash Balance is $24,000

C. Calculation to determine the amount of service revenue that would be recognized in 2014

Based on the information given the Nine months of unearned revenue from 2013 will be recognized in 2014

2014 Recognized service revenue=$24,000*9/12

2014 Recognized service revenue= $18,000

Therefore the amount of service revenue that would be recognized in 2014 is $18,000