What would the October's earnings of the company be if the portion ofunearned revenues recognized in October
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2.What would be the implications for November's earnings if the portion ofunearned revenues recognized in October were £600 rather than £900?
3. Do you have reasons to suspect that the revenue may currently havebeen recognized prematurely?
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BCE is a software company which over the past two years has been reporting losses. The CEO of BCE commits that in October 2017, the company will enter a stage of stable growth and the shareholders will start to see again returns on their investment. On September 30th, 2017 the balance sheet of BCE Company was: Liabilities: Accounts Payable Unearned Revenue Total Liabilities: Assets: Cash Accounts Receivable Supplies Equipment - at cost Less: Accumulated Depreciation Total Assets: October 1st October 5th October 20th During October, the following transactions occurred: October 31st October 31st £ 2,790 2,910 1,120 10,000 ● (500) ● 16,320 Equity: Share Capital Retained Earnings Total Equity: Total Liabilities and Equity: 10,000 3,000 13,000 £ 2,360 960 3,320 16,320 Paid £600 for a one-year insurance policy that will expire next year, on September 30th 2018. Received £1,000 cash due from customers, paying outstanding amounts due for service provided in September 2017. At the end of October, the BCE Company needed to make accrual adjustments to the accounts, using the following information: Depreciation for the month is £500. Performed services for customers and billed them for the fees of £2,160, to be paid in December 2017. Paid salaries to employees for the month of October £2,000. Received £750 from customers for services to be provided in the future. Of the unearned revenue at the beginning of the month, £900 has been earned in October. An inventory count at the close of business on October 31 reveals that £620 of supplies are still on hand. BCE is a software company which over the past two years has been reporting losses. The CEO of BCE commits that in October 2017, the company will enter a stage of stable growth and the shareholders will start to see again returns on their investment. On September 30th, 2017 the balance sheet of BCE Company was: Liabilities: Accounts Payable Unearned Revenue Total Liabilities: Assets: Cash Accounts Receivable Supplies Equipment - at cost Less: Accumulated Depreciation Total Assets: October 1st October 5th October 20th During October, the following transactions occurred: October 31st October 31st £ 2,790 2,910 1,120 10,000 ● (500) ● 16,320 Equity: Share Capital Retained Earnings Total Equity: Total Liabilities and Equity: 10,000 3,000 13,000 £ 2,360 960 3,320 16,320 Paid £600 for a one-year insurance policy that will expire next year, on September 30th 2018. Received £1,000 cash due from customers, paying outstanding amounts due for service provided in September 2017. At the end of October, the BCE Company needed to make accrual adjustments to the accounts, using the following information: Depreciation for the month is £500. Performed services for customers and billed them for the fees of £2,160, to be paid in December 2017. Paid salaries to employees for the month of October £2,000. Received £750 from customers for services to be provided in the future. Of the unearned revenue at the beginning of the month, £900 has been earned in October. An inventory count at the close of business on October 31 reveals that £620 of supplies are still on hand.
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Related Book For
Entrepreneurial Finance
ISBN: 978-1305968356
6th edition
Authors: J. Chris Leach, Ronald W. Melicher
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