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Clark Bell started a personal financial planning business when he accepted $59.000 cash as advance payment for managing the f

b. How much revenue would Bell recognize on the Year 2 income statement? (Do not round intermediate calculations and round yo

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Answer #1

Requirement a:

CLARK BELL PERSONAL FINANCIAL PLANNING
Horizontal Statements Model for Year 1
Event Assets = Liabilities + Stockholders'
Equity
Income Statement Statement of Cash
Flow
Cash = Unearned
Revenue
+ Retained
Earnings
Revenues - Expenses = Net income
1 Advance payment $59,000 = $59,000 + - = $59,000 OA
2 Revenue earned = ($34,417) + $34,417 $34,417 - = $34,417
Totals $59,000 = $24,583 + $34,417 $34,417 - $0 = $34,417 $59,000

Calculations:

Revenue earned to be calculated for 7 months (June 1, Year 1 to Dec 31, Year 1).

So that revenue earned = (59,000 x 7/12) = $34,417

Requirement b:

Revenue to be recognized in year 2 $24,583

Calculations:

Revenue recognized in Year 2= Total advance received in Year 1 - revenue recognized in Year 1

= $59,000 - $34,417

=$24,583

Requirement c:

Amount of cash flow from operating activities in Year 2 $0

Explanation:

No amount to be received in Year 2. So that amount of cash flows from operating activities in Year 2 is $0

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