Question

Which journal entry reflects the adjusting entry needed on December 31? In November, BOC received a $5,000 cash deposit from a customer for custom-build goods that will be delivered in January (BOC recorded an entry for this $5,000 in November). Now, it is December 31, the end of the fiscal year.
a. Dr. Unearned Revenue 5,000
b. Cr. Inventory 5,000
c. No entry needed.
d. Dr. Cash 5,000
e. Cr. Revenue 5,000
f. Dr. Advances from Customers 5,000
g. Cr. Revenue 5,000
h. Dr. Unearned Revenue 5,000
i. Cr. Revenue 5,000

Answer 1

Answer:

The correct  option is C,no entry needed

Explanation:

The $5,000 received as as revenue in advance would have been debited to cash and credited to revenue in advance as a liability,hence as at December 31st of the same year,no single adjusting entry is required since the actual sales of goods did not take place in December.

In January,when sales is expected to have taken place by transferring the goods paid for to the customer,the adjustment in the books of accounts would a credit to sales revenue and a debit to revenue in advance.