On September 1, Advantage Maintenance Company contracted to provide monthly maintenance services for the next five months at a rate of $3,000 per month. The client paid Advantage $15,000 on September 1. The maintenance services began on that date. Assuming Advantage records deferred revenues using the alternative treatment, what would be the adjusting entry recorded on December 31?

Question

Luca Marquez

Business

20 September, 22:50

On September 1, Advantage Maintenance Company contracted to provide monthly maintenance services for the next five months at a rate of $3,000 per month. The client paid Advantage $15,000 on September 1. The maintenance services began on that date. Assuming Advantage records deferred revenues using the alternative treatment, what would be the adjusting entry recorded on December 31?

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Emerson Macias · Answer 1

Adjusting Entry

December 31,

Dr. Service Revenue $3,000

Cr. Unearned Revenue $3,000

Explanation:

Using alternate treatment the cash received in advance is recorded as the revenue initially.

On September following entry was performed

Dr. Cash $15,000

Cr. Revenue $15,000

At the end of the year services of 4 months have been performed and the amount of one month's service is received in advance until this date. It needs to be adjusted according to the accrual concept.