Ltra Day Spa provided $87,200 of services during Year 1. All customers paid for the services with credit cards. Ultra submitted the credit card receipts to the credit card company immediately. The credit card company paid Ultra cash in the amount of face value less a 3 percent service charge.

Required

1) Record the credit card sales (Event 1) and the subsequent collection of accounts receivable (Event 2) in a horizontal statements model like the one shown here. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). Use NA to indicate that an element is not affected by the event.

B1) What is the amount of total assets at the end of the accounting period?

2) What is the amount of revenue reported on the income statement?

3) What is the amount of cash flow from operating activities reported on the statement of cash flows?

Question

Briley Riley

Business

1 June, 09:54

Ltra Day Spa provided $87,200 of services during Year 1. All customers paid for the services with credit cards. Ultra submitted the credit card receipts to the credit card company immediately. The credit card company paid Ultra cash in the amount of face value less a 3 percent service charge.

Required

1) Record the credit card sales (Event 1) and the subsequent collection of accounts receivable (Event 2) in a horizontal statements model like the one shown here. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). Use NA to indicate that an element is not affected by the event.

B1) What is the amount of total assets at the end of the accounting period?

2) What is the amount of revenue reported on the income statement?

3) What is the amount of cash flow from operating activities reported on the statement of cash flows?

+3

Answers (1)

Know the Answer?

Jeffery Pearson · Answer 1

Assets = Liabilities + Equity

cash acc. rec. ret. ear.

Event 1 87,200 87,200

Event 2 84,584 - 87,200 - 2,616

Revenue - Expenses = net income

Event 1 87,200 0 87,200

Event 2 0 2,616 - 2,616

net cash flow activity

Event 1 0 OA

Event 2 84,584 OA

Explanation:

Journal entry for event 1, credit card sales are submitted

Dr Accounts receivable 87,200

Cr Service revenue 87,200

Journal entry for event 2, credit card sales are collected

Dr Cash 84,584

Dr Credit card company fees 2,616

Cr Accounts receivable 87,200