Effect of unearned revenue on financial statementsDonald Jones started a personal financia...

Effect of unearned revenue on financial statements

Donald Jones started a personal financial planning business when he accepted $30,000 cash as advance payment for managing the financial assets of a large estate. Donald agreed to manage the estate for a 12-month period, beginning April 1, 2011.

Required

a. Show the effects of the advance payment and revenue recognition on the 2011 financial statements using a horizontal statements model like the following one. In the Cash Flows column, (use OA to designate operating activity, IA for investing activity, FA for financing activity,’ and NC for net change in cash. Use NA if the account is not affected.

b. How much revenue would Jones recognize on the 2012 income statement?

c. What is the amount of cash flow from operating activities in 2012?