Question

1. On October 1, Year 1, YD collected $33,600 for consulting services it agreed to provide during the coming year.
2. Adjusted the accounts to reflect the amount of consulting service revenue recognized in Year 1

   Prepare an balance sheet for the Year 1 accounting period. (Do not round intermediate calculations.)

3. Prepare an income statement for the Year 1 accounting period. (Do not round intermediate calculations.)

4. Record the events under an accounting equation. (Do not round intermediate calculations. Enter any decreases to account balances with a minus sign.)

   YARD DESIGNS
   Accounting Equations for the Year 1
   Event	Assets	=	Liabilities	+	Stockholders’ Equity
   	Cash	=	Unearned Revenue	+	Retained Earnings
   Event	33,600	=	33,600	+
   Adj.		=	(8,400)	+	8,400
   	33,600	=	25,200	+	8,400

5. YARD DESIGNS
   Income Statement
   For the Year Ended December 31, Year 1
   Revenue	$8,400
   Expense	0
   Net income	$8,400

6. YARD DESIGNS
   Balance Sheet
   As of December 31, Year 1
   Assets
   Cash	$33,600
   Total assets		$33,600
   Liabilities
   Unearned revenue	$25,200
   Total liabilities		$25,200
   Stockholders’ Equity
   Total stockholders’ equity		0
   Total liabilities and stockholders’ equity		$25,200

7. Prepare an statement of cash flows for the Year 1 accounting period. (Do not round intermediate calculations. Amounts to be deducted should be indicated with a minus sign.)

   YARD DESIGNS
   Statement of Cash Flows
   For the Year Ended December 31, Year 1
   Cash flows from operating activities
   Net cash flow from operating activities		$0
   Cash flows from investing activities
   Cash flows from financing activities
   Net change in cash		0
   Ending cash balance		$0

8. Ignoring all other future events, what is the amount of service revenue that would be recognized in Year 2? (Do not round intermediate calculations.)

   Service revenue to be recognized in Year 2

Answer 1

(a)

Accounting Equation for the year 1

Events Assets = Liabilities + Stockholder's Equity

Cash = Unearned Revenue + Retained Earnings

Event 33,600 = 33,600 + Nil

Adj. = -8,400(note) + 8,400

33,600 = 25,200 + 8,400   

Note: 33,600 * 3/12 = $ 8,400

(b) Yard Designs Income Statement

For the Year Ended December 31, Year 1

Particulars	Amount ($)
Revenue	8,400
Less: Expense	Nil
Net Income	8,400

(c)   Yard Designs Balance Sheet

  As of December 31, Year 1

Particulars	Amount($)
Assets:
Cash	33,600
Total Assets	33,600
Liabilities:
Unearned Revenue (33,600 * 9/12)	25,200
Total Liabilities	25,200
Stockholder's Equity:
Retained Earnings	8,400
Total Stockholder's Equity	8,400
Total Liabilities & Stockholder's Equity(25,200+8,400)	33,600

  

(d)   Yard Designs Statement of Cash Flows

For the Year Ended December 31, Year 1

Particulars	Amount($)
Cash Flows From Operating Activities:
Cash Receipt from Revenue	33,600
Net Cash Flow from Operating Activities	33,600
Cash Flows From Investing Activities:	Nil
Cash Flows From Financing Activities:	Nil
Net Change in Cash	33,600
Plus: Beginning Cash Balance	Nil
Ending Cash Balance	33,600