Raylan received a $67,000 cash advance payment on June 1, Year 1, for consulting services to be performed in the future. Services were to be provided for a one-year term beginning June 1, Year 1. Required a. & b. Record the June 1 cash receipt in T-accounts and the adjustment required as of December 31, Year 1. c. Show the preceding transaction and related adjustment in a horizontal statements model. d. Determine the amount of net income on the Year 1 income statement. What is the amount of net cash flow from operating activities for Year 1? e. What amount of liabilities would Raylan report on the Year 1 balance sheet?

A)

Cash					Unearned Revenue
Beg. Bal					Beg. Bal
End. Bal					End. Bal
Service Revenue
Beg. Bal
End. Bal

B)

RAYLAN COMPANY

Effect of Transactions on Financial Statements

Balance Sheet

Income Statement

Statement of Cash Flows

Date

Assets

=

Liabilities

+

Stockholders Equity

Revenue

Expenses

=

Net Income

6/1

=

+

=

12/31

=

+

=

Balance

=

+

=

C)

Revenue
Expenses
Net income
Cash flows from operating activities:
Cash received from revenue
Net cash flow from operating activities

D)

Unearned revenue