Question

Anderson Company is a publicly listed company in British Columbia and is engaged in the business of installing carpet. Its annual sales for the year ended December 31, 2021 amounted to $1 billion and its net income amounted to $200 million. 5:00 On December 20, 2021, Anderson received a cabom Surder of $6,000 to install carpet in the customer's house. Installation work was begun on December 31, 2021 and completed on February 28, 2022. The customer has made full payment to Anderson on the day they placed the order and the sum received was fully recorded as sales revenue installation income) by Anderson in December 2021. No wages for this job was paid and recorded on December 31, 2021.

find the mistakes in the statements

Answer 1

Advances received for services to be provided in future period of time or goods to be delivered in future period of time shall be recorded as Unearned Revenue. Unearned Revenue is a Current Liability Account. After completion of services or delivery of goods, revenue shall be recorded by debiting Unearned Revenue and Crediting Revenues account (either Service Revenue or Sales Revenue) In the present case, advance received from Customers of $6,000 completely recorded as revenues instead of recording it as Unearned Revenue. As Per information , the Job has duration from December 31, 2021 to February 28, 2022 total 60 days. As the work is started from December 31, the revenue shall be proportionately recorded for the day december 31, 2021. That amount is $6000/60 days x 1 day = $100. Unearned Revenue should be $6000 - $100 = $5900.