Question

This fact pattern provides information needed to answer Q#10 through Q#16. On August 1, Year 1, Hoppy Company agreed to provide consulting service to a large client over a 24-month period. It was agreed that these services would be provided in equal monthly amounts starting on August 1, Year 1. These services were provided as agreed. The aggregate value of all services under this contract was $480,000. In Year 1, Hoppy received $110,000 from this large client. Also in Year 1, Hoppy contracted with a smaller client to provide $24,000 in consulting services during each month for 30 months starting on November 1, Year 1. These services were provided as agreed. The smaller client advanced (paid) Hoppy $30,000 when the contract was signed on November 1, Year 1. In Year 2. both clients received services as required by their contracts. The large Click Save and Submit to save and submit. Click Save All Answers to save all answers Se All we hulu FS F6 A 4 % 5 & 7 6 & 옥 8 9 R T Y U F G H. J к L V B N M

#15

use first two photos to answer #15 in photo 3 please

Answer 1

Note: Question is solved considering years end on 31st December.

Account balance with large client:

Particulars	Amounts
Revenue earned in Year 1(1 August to 31 December, i.e. 5 months)	100000
Less: Amount received in year 1	-110000
Add: Revenue earned in year 2 (1 January to 31 December, I.e. 12 months)	240000
Less: Amount received in year 2	-300000
Balance at end of year (I.e. Advance Received in given case)	-70000

Working Note: Monthly revenue = 480000/24

= 20000

Account balance with smaller client

Particulars	Amounts
Revenue earned in Year 1(1 November to 31 December, i.e. 2 months)	48000
Less: Amount received in year 1	-30000
Add: Revenue earned in year 2 (1 January to 31 December, I.e. 12 months)	288000
Less: Amount received in year 2	-230000
Balance at end of year (I.e. Account Receivable in given case)	76000

As per GAAP, Accounts Receivable and Advances Received shall not be set off.

Hence, Accounts Receivable at year 2 shall be 76000 and Advances received of 70000 from larger client shall be disclosed separately.