On April 1, 2013, Guyton Sails accepted a $12,000 advance payment for maintaining a customer's fleet of sail boats. The contract is for a twelve month period. In May 2013, the company performed $1,200 worth of repairs. What is the remaining liability that would appear on the company's balance sheet at the end of May?

Question

Quizplus · Accepted Answer

The remaining liability is the unearned revenue, which is the amount of the advance payment that has not yet been earned. The company has earned $1,200 of the advance payment, so the remaining liability is $12,000 - $1,200 = $10,800.

On April 1, 2013, Guyton Sails Accepted a $12,000 Advance