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9 March, 18:13

Warner Company received $48,000 cash in advance for services to be performed over the one-year period from September 1, 2015 through August 31, 2016. Using a horizontal financial statements model, which of the following statements does not correctly reflect the effect of this transaction when Warner Company collects the cash?

a. Assets are increased.

b. Liabilities are increased.

c. Revenue is increased.

d. Cash flow from operating activity is increased.

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  1. 9 March, 18:22
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    c. Revenue is increased.

    Explanation:

    Cash Received in advance from customer for future services will be a liability it will increase the assets as increase in cash, increase the liability as unearned revenue and increase in cash flow from operating activities as cash received from as customer. So c. Revenue is increased. does not correctly reflect the transaction.
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