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Accounting 211 Thursday, January 21st, 1999 Announcements: none Lecture notes: Example: 7/1/98 $36,000 is received from a tenant. The payment covers the 2 year period beginning 7/1/98 and ending 6/30/98. Cash 36,000 Unearned Revenue 36,000 Deferral: covers the next 2 years, we don't recognize revenue because we haven't earned it Adjusting Entry (12/31/98): Unearned Revenue 9,000 Revenue 9,000 What is the impact on financial statements if the adjusting entry is now made? Income Statement: Revenues are too high, Net Income is too low Balance Sheet: Liabilities are too high, SE is too low As of 12/31/98: Revenue $9,000 Unearned Revenue $27,000 Retained Earnings Illustration (assumptions--business began in 1991) 1991 Net Income $15,000 1991 Dividends-$3,000 12/31/91 Retained Earnings $12,000 1992 Net Income $21,000 1992 Dividends-$7,000 12/31/92 Retained Earnings $26,000 *Retained earnings are the ... View Full Document

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