Q1TIAT_2 - Horngren'S Financial And Managerial Accounting

Question

Before you begin this assignment, review the Tying It All Together feature in the chapter. Part of the Fry’s Electronics, Inc.’s experience involves providing technical support to its customers. This includes in-home installations of electronics and also computer support at their retail store locations.

Requirements 

2. Assume Fry’s Electronics, Inc.’s Modesto, California, location received $24,000 for an annual contract to provide computer support to the local city government. How would Fry’s Electronics record this transaction? What financial statement(s) would this transaction affect?

Step-by-Step Solution

Answer

The business transaction is recorded and the financial statements affected will be the balance sheet.

Step 1: Recording the transaction

Journal Entries
Date	Particulars	Debit ($)	Credit ($)
	Cash	$24,000
	Unearned Revenue		$24,000

Step 2: Financial Statement affected by the transaction

The major financial statement which is directly affected by this transaction will be as follows:

Balance Sheet: The cash received will increase the assets side of the balance sheet. The unearned revenue will increase the liabilities of the business.