E3-27A. (Learning Objectives 1, 3: Linking deferrals and cash flows) New Age Mobile, the British wireless phone service provider, collects cash in advance from customers. All amounts are in millions of pound sterling (£). Assume New Age Mobile collected £410 in advance during 20X7 and at year-end still owed customers phone service worth £160.

Requirements 1. Show what New Age Mobile will report for 20X7 on its Income Statement and Balance Sheet.

2. Use the same facts for New Age Mobile as in Requirement 1. Further, assume New Age Mobile reported unearned service revenue of £65 back at the end of 20X6. Show what New Age Mobile will report for 20X7 on the same financial statements. Explain why your answer here differs from your answer to Requirement 1.