Question

(a) On December 1, $18,000 was received for a service contract to be performed from December 1 through April 30.


(b) If the service work for this contract is performed evenly and on a regular basis throughout this period, prepare the adjusting journal entry on December 31.


Required:


Record journal entries for the above transactions.

Answer 1

Answer:

Journal entries are shown below.

Explanation:

(a). Journal entry

On Dec.1

Cash A/c Dr.        $18,000

        To Unearned revenue A/c        $18,000

(Being cash received for a service contract is recorded)

(b) Journal entry

On Dec.31

Unearned Fees  A/c Dr.         $3,600

           To Fees Earned A/c            $3,600

( Being unearned fees is recorded.)

The computation of unearned fees is given below:

= $18,000 ÷ 5 months

= $3,600