Question

Technical Services is working on a six-month job for a client, starting on February 1. It will collect $30,000 from its customer when the job is finished but the revenue is earned evenly over the six months. On March 31, before adjusting entries are made, Techno's Accounts Receivable account had a debit balance of $6,000. After the March 31 monthly adjusting entry has been made, what will be the balance in Accounts Receivable?

Answer 1

Answer:

Accounts receivable balance as at March 31 = $ 16,000

Explanation:

The adjusting entry for the earned revenue on the contract is calculated as follows:

Total contract Value              $ 30,000

Period of contract                  6 months

Earned Revenue per month  $ 5,000

Period of earning                    2 months

Earning for the period February 1 to March 31   2 * $ 5,000 = $ 10,000

The accounting entry would be

Accounts Receivable  $ 10,000  

Revenue                                          $ 10,000

so the receivable balance after adding $ 6,000 is $ 16,000