How Unearned Revenue inks Cash and SalesRevenue On March 15, the Spinnaker Compa

Question

How Unearned Revenue inks Cash and SalesRevenue

On March 15, the Spinnaker Company received $4,500 in cash froma customer who ordered a customer sail for her racing yacht. Thecompany completed the sail and delivered it on April 30. TheSpinnaker Company incurred costs of $3,000 in making the sail.Assume the company recorded the manufacturing costs in theMerchandise Inventory account.

Example:Date                 Cash               UnearnedRevenue          Sales Revenue

             Feb.24              3,000                         3,000        

             Mar.3                                                  -3,000                               3,000

           Net result            3,000                             0                                  3,000

Explanation / Answer

Date

Cash

Unearned Revenue

Sales Revenue

Date

Manufacturing Costs

Merchandise inventory

Cost of goods sold

Date

Cash

Unearned Revenue

Sales Revenue

15-Mar 4,500.00 4,500.00 30-Apr -4,500.00 4,500.00 Net Result 4,500.00 0.00 4,500.00

Date

Manufacturing Costs

Merchandise inventory

Cost of goods sold

15-Mar 3,000.00 3,000.00 30-Apr -3,000.00 3,000.00 Net Result 3,000.00 0.00 3,000.00

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