On September 1,Year 1,Gomez Company collected $9,000 in advance from a customer for services to be provided over a one-year period beginning on that date.How much revenue would Gomez Company report related to this contract on its income statement for the year ended December 31,Year 1? How much would the company report as net cash flows from operating activities for Year 1?
A)$3,000;$3,000
B)$9,000;$9,000
C)$3,000;$9,000
D)$0;$9,000

Question

Quizplus · Accepted Answer

Monthly revenue = Receipt of $9,000 ÷ 12 months = $750 per month
Revenue (on the income statement)= $750 per month × 4 months (September through December)= $3,000
The company will recognize the $9,000 received as a cash inflow for operating activities in Year 1.

On September 1,Year 1,Gomez Company Collected $9,000 in Advance from a Customer