*please explain answer briefly* For simplicity, assume that customers always pay
ID: 2374167 • Letter: #
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*please explain answer briefly*
For simplicity, assume that customers always pay in advance. A company booked $50 in sales revenue in a given year but received $35 in cash from its customers in that year. Sales revenue exceeded cash received because some of the advance receipts in the prior year were booked as sales revenue this year. Which one of the following best describes the adjustment to reconcile net income to the operating cash flows? $15 to be added due to an increase in advances (unearned or deferred revenue) of $15, which reflects an excess of cash collections over revenues. $15 to be added due to a decrease in advances (unearned or deferred revenue) of $15, which reflects an excess of revenues over cash collections. $15 to be subtracted due to an increase in advances (unearned or deferred revenue) of $15, which reflects an excess of cash collections over revenues. $15 to be subtracted due to a decrease in advances (unearned or deferred revenue) of $15, which reflects an excess of revenues over cash collections. $35 to be added due to cash collections.Explanation / Answer
c.
$ 15 is advance. it is shown on liability side of balance sheet.
it does not affect revenue. hence should be deducted
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