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22 January, 05:13

Tao co. Receives $10,000 cash in advance for 4 months of legal services on october 1, 2015, and records it by debiting cash and crediting unearned revenue both for $10,000. It is now december 31, 2015, 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, 2015?

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  1. 22 January, 05:24
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    Adjusting entry for Service Revenue earned:

    It is given that Tao co. Receives $10,000 cash in advance for 4 months of legal services on October 1, 2015, and records it by debiting cash and crediting unearned revenue both for $10,000.

    It is now December 31, 2015, and Tao has provided legal services as planned. So the company needs to record the Revenue Earned for the period (Oct 1 to Dec. 31) that is 3 months = 10,000*3/4 = $7,500

    The adjusting entry to account for the work performed from October 1 through December 31, 2015 shall be as follows:

    Unearned Revenue Debit $7,500

    Revenue Credit $7,500

    (Being adjustment made for the Revenue earned)
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