Homework Answers
Solution:
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 | |||||||||
| 1 | Advance payment | $ 67,000 | = | $ 67,000 | + | $ - | $ - | - | $ - | = | $ - | $ 67,000 | Operating Activity |
| 2 | Revenue earned | $ - | = | $ (39,083) | + | $ 39,083 | $ 39,083 | - | $ - | = | $ 39,083 | $ - | No Effect |
| Total | $ 67,000 | = | $ 27,917 | + | $ 39,083 | $ 39,083 | - | $ - | = | $ 39,083 | $ 67,000 | Net Change in Cash Flow |
b) Year 2 Revenue = $ 67,000 ( 5 Months / 12 Months) = $ 27,917
c) Year 2 , Amount of cash flow from operating activity = $ 0 ( Nil, because there is no cash transaction occured during year 2, year 2 revenue is just an adjusting entry.
Notes:
1) Year 1 , Revenue earned = $ 67,000 ( 7 Months / 12 Months)( 1st June to 31st December) = $ 39,083.
2) Calendar year is considered as financial year.
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he accepted $58,000 cash as advance payment for managing the
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Required
a. Show the effects of the advance payment and
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Flows column, use OA to designate operating activity, IA for...
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