Question

During 2021, Ocean Consulting had the following transactions with its clients (customers): On February 1, 2021, the company received cash of $5,100 from clients in payment of their account balances as of December 31, 2020. On November 1, 2021, the company received $2,100 cash as payments in advance for services to be performed in 2022. The company received a total of $13,500 in cash for services that were performed during 2021. The company sent bills totaling $4,100 to clients for services performed during 2021; this amount was unpaid as December 31, 2021. What is the amount of Service Revenue that will be reported on the income statement for the year 2021?

Answer 1

The service Revenue will be:

1. Cash for service performed in 2021 -------------------------- $13,500

2. Bill sent to clients for service performed in 2021--------- $4,100

TOTAL------------------------------------------------------------------------$17,600

The $5,100 received was for the service done in 2020 and this will be decrease the account receivables on the balance sheet while the $2,100 received for work to be done in 2022 will be recorded as an unearned revenue because the service has not been rendered.