Abe Technologies provides maintenance service for computers and office equipment

Question

Abe Technologies provides maintenance service for computers and office equipment for companies throughout the Northeast. The sales manager is elated because she closed a $300,000, 3-year maintenance contract on December 29, 2016, two days before the company’s year-end. “Now we will hit this year’s net income target for sure,” she crowed. The customer is required to pay $100,000 on December 29 (the day the deal was closed). Two more payments of $100,000 each are also required on December 29, 2017 and 2018. Discuss the effect that this event will have on the company’s financial statements.

Explanation / Answer

The effect of events in the financial statement of Abe Technologies; Journal entries at the time of each event Date Account's tittle Debit $ Credit $ 2016 29-Dec Accounts Receivable           300,000 Service Revenue              300,000 29-Dec Cash           100,000 Accounts Receivable              100,000 2017 29-Dec Cash           100,000 Accounts Receivable              100,000 2018 29-Dec Cash           100,000 Accounts Receivable              100,000 The entire service revenue shall recogonize in the year of 2016. Unpaid amount of $ 200,000 shall be shown as accounts receivable as on December 31,2016.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.