Question

Best Lawn Care Inc. (BLC) offers its customers two lawn maintenance services. One service is for a one-year maintenance plan at a cost of $220. Customers can earn a 5% discount from this price if they pay before BLC’s calendar fiscal year for maintenance services to be performed in the following year. The second service offered by BLC is a three-year maintenance plan that sells for $510. The first year’s maintenance service for this three-year plan will be delivered before BLC’s fiscal year end. No discount for early payment is offered for the second plan.

Determine the statement of financial position (SFP) classification of the unearned portion of the revenue collected.

Current portion of the unearned revenue		$
Non-current portion of the unearned revenue		$

Answer 1

Unearned Revenue is the amount of revenue that received but the services against this reveneue is not yet performed.

Current portion of unearned revenue is the amount for which service should be performed in within 12 months.

Non-current portion of earned revenue is the amount for which service will be performed after 12 months.

In this case, Best Law care offers two lawn maintenance service. First is one year maintenance and second is three year maintenance. In first service, maximum amount received of amount $220 less 5% discount i.e. $209. This service is not yet performed.

In second service, One year maintenance has been done but two year is still not performed and amount recieved of $510.

Therefore, current portion of unearned revenue is $209.

Non-current portion of unearned revenue is $340 i.e. ($510/3*2) two year service that not performed.