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Clark Bell started a personal financial planning business when he accepted $55,000 cash as advance payment...

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Accounting

Clark Bell started a personal financial planning business whenhe accepted $55,000 cash as advance payment for managing thefinancial assets of a large estate. Bell agreed to manage theestate for a one-year period beginning June 1, Year 1.

Required
a. Show the effects of the advance payment and revenue recognitionon the Year 1 financial statements using a horizontal statementsmodel given below. In the Statement of Cash Flows column, use OA todesignate operating activity, IA for investing activity, FA forfinancing activity, and NC for net change in cash. (Do not roundintermediate calculations. Enter any decreases to account balancesand cash outflows with a minus sign. Not all cells in the"Statement of Cash Flows" column may require an input - leave cellsblank if there is no corresponding input needed.)

b. How much revenue would Bell recognize on the Year 2 incomestatement? (Do not round intermediate calculations and round yourfinal answer to nearest whole number.

enue to be recognized in Year 2

c. What is the amount of cash flow from operating activities inYear 2?

Amount of cash flow fromoperating activities


Answer & Explanation Solved by verified expert
3.8 Ratings (348 Votes)

ANSWER

a)

CLARK BELL PERSONAL FINANCIAL PLANNING
Horizontal Statements model for year 1
Event Balance Sheet Income Statement Statement of Cash Flows
Assets =Liabilities +Stockholders Equity Revenue -Expense =Net Income
Cash Unearned Revenue Retained Earnings
Advance Payment    55,000.00                         55,000.00                                         -                                      -                  -                         -                                   57,000.00 OA
Revenue Earned                   -   -                      32,083.33                         32,083.33                    32,083.33                -          32,083.33                                                 -   NA

b)

22,916.67

c)

0

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