Question

On January 1, Year 2, the Supplies account of Sheldon Company had a balance of $1,200. During the year, the company purchasedOn December 1, Year 1, Jacks Snow Removal Company received $6,000 of cash in advance from a customer and promised to provideOn September 1, Year 1, Gomez Company collected $9,000 in advance from a customer for services to be provided over a one-year

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Answer #1

Supplies beginning = $1,200

Supplies purchased = $3,400

Supplies ending = $1,400

Supplies expense = Supplies beginning + Supplies purchased - Supplies ending

= 1,200+3,400-1,400

= $3,200

Hence, following items should be reported on Sheldon's year 2 financial statements:

Supplies = $1,400

Supplies expense = $3,200

Third option is correct option.

Service revenue for 3 months = $6,000

Hence, Service revenue for the month of December = 6,000 x 1/3

= $2,000

Due to service revenue earned for December, equity will increase by $2,000.

Second option is correct option.

On September 1, $9,000 was received in advance for service to be provided for 1 year.

service revenue for 4 months ( From September to December) = 9,000 x 4/12

= $3,000

Revenue to be recorded on the income statement = $3,000

Cash flows from operating activities = $9,000

Third option is correct option.

Kindly comment if you need further assistance.

Thanks‼!

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