Homework Answers
On December 1, year 1 cash $12,900 was received in advance for services to be provided over next 3 months.
Service revenue for the month of December = 12,900 x 1/3
= $4,300
Hence, the year end adjustment on December 31, year 1, to recognize the partial expiration of the contract will have the following effects:
- Liabilities will decrease by $4,300 in the form of unearned revenue.
- Equity will increase by $4,300 due to service revenue earned.
Correct option is (B)
It will have no effect on assets.
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advance from his client, james Company, for services to be
performed over the next six months.
Required:
a. Recored the deferral and the related December 31, Year 1,
adjustment for Josh Smith is an accounting equation.
b. Record the deferral and the related December 31, year 1,
adjustment for james company in an accounting equation.
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