Consider the following information for YumYum Inc. as of December 31, 2015: YumY
ID: 2415780 • Letter: C
Question
Consider the following information for YumYum Inc. as of December 31, 2015:
YumYum has a service contract with a maintenance company. The contract is for cleaning
services at a rate of $3,000 per month. The maintenance company bills YumYum semiannually
on October 1 and April 1. The contract commenced on October 1, 2015.
During 2015, YumYum received advances from customers for the first time. Total collections in
2015 were $100,000. At December 31, 2015, $30,000 of the advances had not been earned.
In 2015, YumYum had 50 employees. Each employee earned 10 days of vacation pay. The actual rate for 2005 was $300 per day. During 2015, 10 employees used all of their vacation days for 2015. At January 1, 2015, the Vacation Payable account had a balance of $10,000.
What is the amount of liability for advances from customers at December 31, 2015?
$30,000
$70,000
$100,000
$130,000
$30,000
$70,000
$100,000
$130,000
Explanation / Answer
Calculate amount of liability as on Dec 2015:
Amount of liability = Total advances earned - Advances not collected
= $10,000 - 30,000
= $70,000
Therefore, option B is correct answer.
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