Question

Lake Co. receives nonrefundable advance payments with special orders for containers constructed to customer specifications. Related information for 2018 is as follows ($ in millions):
Customer advances balance Dec 31, 2008 110
Advances received with 2009 orders 195
Advances applicable to orders in 2009 180
Advancs from orders canceled in 2009 45

What amount should Lake report as a current liability for advances from customers in its Dec. 31, 2009, balance sheet?

a. $0.
b. $80 .
c. $125.
d. $170.

Answer 1

Solution :

We calculate the advances form the customer to be reported as the current liability as on Dec. 31, 2009 in the balance sheet as follows :

           Particulars                                                                  Amount ($)

Customer advances the balance Dec 31, 2008                           110

Add : advances that is  received with 2009 orders is                 195

Less : advances applicable to the orders in 2009                      -180

Less : advances from orders that are canceled in 2009            -45  

Advances from the customers liability Dec. 31, 2009                  80

Therefore, the advance from the customer to be reported in the balance sheet as the current liability is $80.