Question

a. Tao Co. receives $11,800 cash in advance for four months of legal services on October 1, 2017, and records it by debiting Cash and crediting Unearned Revenue both for $11,800. It is now December 31, 2017, and Tao has provided legal services as planned. What adjusting entry should Tao make to account for the work performed from October 1 through December 31, 2017? Unearned revenue Step 1: Determine what the current account balance equals. 4 Step 2: Determine what the current account balance should equal. Step 3: Record the December 31 adjusting entry to get from step 1 to step 2.

Answer 1

Step 1: Determine what the current account balance equals $ Unearned Subscription Debit/Credit Revenue 11,800 Credit $ 11,800 $ 8,850 2,950 Credit $ 2,950 Step 2: Determine what the current account balance should equal $ Step 3: Record the december 31 adjusting entry to get from Step1 to Step2 Adjusting entry Accounts Title Unearned Revenue Legal Service Revenues Credit Debit $ 8,850 $ 8,850 Step 1: Determine what the current account balance equals $ Debit/Credit Unearned Subscription 4,400 Credit $ 4,400 $ 2,200 2,200 Credit $ 2,200 Step 2: Determine what the current account balance should equal $ Step 3: Record the december 31 adjusting entry to get from Step1 to Step2 Adjusting entry Accounts Title Unearned Revenue Legal Service Revenues Credit Debit $ 2,200 $ 2,200

Total number of months for which amount is received Amount for 12 months subscription No of subscribers Total amount received for subscription (for 12 months) 12 Months $ 44 100 $ 4,400 But services provided for 6 months only which is earned remaning amount is unearned Amount related to 6 months is =$ 4,400*6/12 $ 2,200 Credit Accounts tittle Unearned subscription revenue Subscription revenue Debit $ 2,200 $2,200