Question

Lake Co. receives nonrefundable advance payments with special orders for containers constructed to customer specifications. Related information for 2021 is as follows ($ in millions): Customer advances balance, Dec. 31, 2020 $ 120 Advances received with 2021 orders 189 Advances applicable to orders shipped in 2021 182 Advances from orders canceled in 2021 36 What amount should Lake report as a current liability for advances from customers in its Dec. 31, 2021, balance sheet

Answer 1

Answer:

Lake Co.

Current Liability for Advances from Customers in Dec. 31, 2021 balance sheet:

Amount to report as current liability for advances from customers:

= $127

Explanation:

Advances from Customers:

Dec. 31, 2020 balance       $120

Cash received                      189

Total liability                      $309

Earned Revenue                 182

Current liability                  $127

Advances, which Lake Co., received from customers for orders not yet fulfilled are recorded as deferred revenue or liabilities because Lake Co. is still owing the respective customers until the services or goods are provided.  Earned Revenue is the value of revenue that would be reported in the income summary for which exchange of value or promises had been completed.