A531-7UFS - Name Umme Fatema Siddique Student Number 805...

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Name: Umme Fatema Siddique Student Number: 805 936 291 Course Code/Number: ACCT 531 Assignment Number: 7 Accounting in Action: CM2 > Part I: Unearned Revenues Requirement (a): Amount of Unearned Revenue The amount of Unearned Revenue that CM2 should report in the balance sheet at the end of 2010 would be as follows: Service Contract 1: [($42,000/6 months) x 3 months] = $21,000 Service Contract 2: [($75,000/12 months) x 10 months] = $62,500 Service Contract 3: [($90,000/12 months) x 11 months] = $82,500 Total Unearned Revenue for 2011 $166,000 Requirement (b): Journal Entry 2010 Service Revenue ($166,000 - $105,000) $61,000 Dec-31 Unearned Revenue $61,000 Requirement (c): Memo explaining the effect of the Journal Entry: Memorandum DATE: 21 st June, 2011 TO: Conner and Martin, Management Team, CM2 Corporation FROM: Umme Fatema Siddique RE: Analysis of existing Unearned Revenue and proposed correction Thank you for allowing me the opportunity to work with your company. As requested, I have evaluated the actual Unearned Revenue account balance based your company existing financial reports and have analyzed the effect of the new calculation on the financial statements.
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Based on my study, I have reached the following conclusions about unearned revenue: Service Contract 1: [($42,000/6 months) x 3 months] = $21,000 Service Contract 2: [($75,000/12 months) x 10 months] = $62,500 Service Contract 3: [($90,000/12 months) x 11 months] = $82,500 Total Unearned Revenue for 2011 $166,000 To adjust this amount with the projected amount of unearned revenue on the forecasted balance sheet, I have added $61,000 more ($166,000 - $105,000) to the unearned Revenue account, which should be the actual obligation or liability of CM2 to its customers. The revenue earned
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