(a) Cash (2004 slips) (300 X $900).............................. 270,000 Dock Rent Revenue......................................... 270,000
Cash (2005 slips) [200 X $900 X (1.00 – .05)]...... 171,000 Unearned Revenue (current).......................... 171,000
Cash (2006 slips) [60 X $900 X (1.00 – .25)]........ 40,500 Unearned Revenue (non-current)................. 40,500
(b) The marina operator should recognize that advance rentals generated $211,500 ($171,000 + $40,500) of cash in exchange for the marina’s promise to deliver future services. In effect, this has reduced future cash flow by accelerating payments from boat owners. Also, the price of rental services has effectively been reduced. The current cash bonanza does not reflect current earned income. The future costs of operation must be covered, in part, from this acce
Cash (2005 slips) [200 X $900 X (1.00 – .05)]...... 171,000 Unearned Revenue (current).......................... 171,000
Cash (2006 slips) [60 X $900 X (1.00 – .25)]........ 40,500 Unearned Revenue (non-current)................. 40,500
(b) The marina operator should recognize that advance rentals generated $211,500 ($171,000 + $40,500) of cash in exchange for the marina’s promise to deliver future services. In effect, this has reduced future cash flow by accelerating payments from boat owners. Also, the price of rental services has effectively been reduced. The current cash bonanza does not reflect current earned income. The future costs of operation must be covered, in part, from this acce
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