Question

Yard Designs (YD) experienced the following events in Year 1, its first year of operation: 1. On October 1, Year 1, YD collected $25,200 for consulting services it agreed to provide during the coming year. 2. Adjusted the accounts to reflect the amount of consulting service revenue recognized in Year 1. Required Based on this information alone: a. Record the events under an accounting equation. (Enter any decreases to account balances with a minus sign.) YARD DESIGNS Accounting Equations for the Year 1 Assets Liabilities Event Stockholders' Equity Retained Earnings Unearned Revenue Cash + + Advance payment Revenue earned + 0 0+ 0

Answer 1

Solution:

YARD DESIGNS
Accounting Equations for the year 1
Event	Assets	=	Liabilities	+	Stockholders Equity
Cash	=	Unearned revenue	+	Retained Earnings
Event	25,200	=	25,200	+
Adj		=	-6300	+	6300
	25,200	=	18,900	+	6300

YARD DESIGNS
Income statement
For the year Ended December 31, Year 1
Revenue	6300
Expenses	0
Net Income	6300

Balancesheet
As of December 31, Year1
Assets
Current assets
Cash		25,200
Total assets		25,200
Liabilities
Unearned revenue		18,900
Total liabilities		18900
Stockholders' Equity
Retained earnings		6300
Total stockholders' Equity		6300
Total Liabilities and stockholders equity		25200

YARD DESIGNS
Statement of cash flows
For the year Ended December 31, Year1
Cash flows from operating activities
Cash received for consulting services		25,200
Net cash flow from operating activities		25,200
Cash flows from investing activities		0
Cash flows from financing activiteis		0
Net change in cash		25,200
Opening cash balance		0
Ending cash balance		25,200

Service revenue recognised in year 2

18,900