(Learning Objectives 1, 3: Linking deferrals and cash fl ows) Nanofone, the British wireless phone service provider, collects cash in advance from customers. All amounts are in millions of pounds sterling (£), the British monetary unit. Assume Nanofone collected £460 in advance during 20X6 and at year-end still owed customers phone service worth £110.

❙ Requirements 1. Show what Nanofone will report for 20X6 on its income statement and balance sheet.

2. Use the same facts for Nanofone as in Requirement 1. Further, assume Nanofone reported unearned service revenue of £55 back at the end of 20X5. Show what Nanofone will report for 20X6 on the same fi nancial statements. Explain why your answer here differs from your answer to Requirement 1.