An advance payment of $1,000 for services was received on December 1 and was recorded as a liability. By the end of the year, $400 has been earned. What is the correct adjusting entry that should be include?

Question

Madelyn Reid

Business

23 August, 01:45

An advance payment of $1,000 for services was received on December 1 and was recorded as a liability. By the end of the year, $400 has been earned. What is the correct adjusting entry that should be include?

+5

Answers (2)

Know the Answer?

Shayla · Answer 1

Debit unearned revenues for $400

Explanation:

Adjusting entries are journal entries made to record revenues and expenses accounts. These entries are made at the end of an accounting cycle.

Payment received for services on December 1 that was recorded as a liability = $1,000

Amount earned by the end of the year = $400

Therefore,

adjusting entry: Debit unearned revenues for $400 so that expenses matched to the accounting period in which the revenue paying for them is earned.

Cherish Jarvis · Answer 2

The answer is "$400"

Explanation:

Given:

advance payment = $ 1,000

by the end of year he earned = $ 400

So, the total eared value is $ 400 because it is the Debit unearned income.