Question

Lake Co. receives nonrefundable advance payments with special orders for containers constructed to customer specifications. Related information for 2018 is as follows ($ in millions): Customer advances balance, Dec. 31, 2017 $ 118 Advances received with 2018 orders 186 Advances applicable to orders shipped in 2018 174 Advances from orders canceled in 2018 46 What amount should Lake report as a current liability for advances from customers in its Dec. 31, 2018, balance sheet?

Answer 1

The $84 should Lake report as a current liability for advances from customers in its Dec. 31, 2018, balance sheet.

Step-by-step explanation:

Current Liability : The current liability is that liability which is for short term. The time period is less than 1 year. It includes bills payable, trade creditors, accrued expenses, etc. It is shown in the balance sheet under liabilities side.

For computing the advances from customers in its Dec. 31, 2018, balance sheet, the equation is shown below:

= Customer advances balance, Dec. 31, 2017 + Advances received with 2018 orders - Advances applicable to orders shipped in 2018 - Advances from orders canceled in 2018

= $118 + $186 - $174 - $46

= $84

Since the orders which are shipped and cancelled is not included whereas the advances which are received is added while computing the advances from customers.

Hence, the $84 should Lake report as a current liability for advances from customers in its Dec. 31, 2018, balance sheet.