Brandon Baily started a personal financial planning business when he accepted $120,000 cash as advance payment for managing the financial assets of a large estate. Baily agreed to manage the estate for a one-year period beginning May 1, Year 1.

Required

a. Show the effects of the advance payment and revenue recognition on the Year 1 financial statements using a horizontal statements model like the following one. In the Statement of Cash Flows column, use OA to designate operating activity, IA for investing activity, FA for financing activity, and NC for net change in cash. Use NA if the account is not affected.

b. How much revenue would Baily recognize on the Year 2 income statement?

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

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Balance Sheet Income Statement Statement Assets Liab. Stk. Equity of Cash Flows Event Cash Unearn. Rev. Ret. Earn. Rev. Exp. Net Inc.