Ultra Day Spa provided $89,850 of services during Year 1. All
customers paid for the services with credit cards. Ultra submitted
the credit card receipts to the credit card company immediately.
The credit card company paid Ultra cash in the amount of face value
less a 1 percent service charge.
Required
a. Show the credit card sales (Event 1) and the
subsequent collection of accounts receivable (Event 2) in a
horizontal statements model like the one shown next. In the
Statement of Cash Flows column, indicate whether the item is an
operating activity (OA), investing activity (IA), or financing
activity (FA). Use NA to indicate that an element is not affected
by the event. (Enter any decreases to account balances with
a minus sign. Round your answers to nearest whole
dollar.)
b. Based on this information alone, answer the following questions:
- (1) What is the amount of total assets at the end of the accounting period?
- (2) What is the amount of revenue reported on the income statement?
- (3) What is the amount of cash flow from
operating activities reported on the statement of cash
flows?
(Round your answers to nearest whole
dollar.)
(1) Total assets (2) Revenue recognized (3) Cash flow from operating activities
Homework Answers
(a.)
| Balance Sheet | Income Statement | Statement of | |||||||||||
| Assets | Liability | Equity | |||||||||||
| Event | Cash | + | Acct. Rec. | = | Reta. Ear. | Revenue | - | Expenses | = | Net Income | Cash Flow | ||
| 1 | NA | + | 88951 | = | NA | 88951 | 89850 | - | 899 | = | 88951 | NA | NA |
| 2 | 88951 | + | -88951 | = | NA | NA | NA | - | NA | = | NA | 88951 | (OA) |
Calculation of Expenses = $89850 * 1 % = $899 (Round Off)
(b.)
| 1 | Total Asset | 88951 |
| 2 | Revenue Recognized | 89850 |
| 3 | Cash Flow from Operating Activity | 88951 |
Add Answer to:
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