Question

Duluth Co. collected a $6,000 cash advance from a customer on November 1, Year 1 for work to be performed over a six-month period beginning on that date. If the year-end adjustment is properly recorded, what will be the effect of the adjusting entry on Duluth's Year 1 financial statements?

Answer 1

Cash 6000

Cash in advance 6000

Cash in advance 2000

Reveneu 2000

Step-by-step explanation:

A cash advance received from customer journal entry is required when a business receives a cash payment from a customer in advance of delivering goods or services. This type of situation might occur for example when a business demands cash in advance to pay for materials on a large or bespoke order or as a rental deposit on a property.

Month revenue recognition

nov-01 1.000

dic-01 1.000

ene-02 1.000

feb-02 1.000

mar-02 1.000

abr-02 1.000

6.000