The Effects of the Advance Payment (Receipt) on Lark Bell's Year 1 Financial Statements are:
Balance Sheet
Assets = Liabilities + Equity
Cash +$36,000 = Unearned revenue +$15,000 + Service Revenue +$21,000
Income Statement Cash Flow
Revenue - Expense = Income Statement
Service Revenue +$21,000 Cash inflow +$36,000 OA
In Year 1, the Assets (Cash) will increase by $36,000. There is a corresponding increase in Liabilities (Unearned Revenue) of $15,000 and an increase in Equity (Service Revenue) of $21,000.
Thus, the amount of revenue that Bell would recognize on the Year 2 income statement from this transaction in Year 1 is $15,000. This covers 5 months from January to May.
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