Baltimore Company reported revenue of $124,000 on its income statement.The balance in its Unearned Revenue account was $6,000 at the beginning of the year and $2,000 at the end of the year.Based on this information alone,the amount of cash that Baltimore collected from customers was $120,000 during the year.

Question

Quizplus · Accepted Answer

The amount of cash collected from customers is equal to the revenue earned plus the decrease in unearned revenue. In this case, the revenue earned is $124,000, the beginning unearned revenue is $6,000, and the ending unearned revenue is $2,000. Therefore, the decrease in unearned revenue is $4,000. Adding the revenue earned and the decrease in unearned revenue gives us $128,000. However, since the question asks for the amount of cash collected from customers, we need to subtract the amount of unearned revenue that was earned during the year. This is equal to the beginning unearned revenue minus the ending unearned revenue, which is $4,000. Therefore, the amount of cash collected from customers is $124,000.

Baltimore Company Reported Revenue of $124,000 on Its Income Statement