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24 February, 20:52

On July 1, 2017, Blossom Co. pays $10,960 to Blue Insurance Co. for a 2-year insurance policy. Both companies have fiscal years ending December 31. Journalize the entry on July 1 and the adjusting entry on December 31 for Blue Insurance Co. Blue uses the accounts Unearned Service Revenue and Service Revenue

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  1. 24 February, 21:16
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    Debit Unearned Revenue $5,480

    Credit Revenue $5,480

    Explanation:

    On December 31, 6 months has been passed so, the revenue of 6 months should be recorded as the payment was recorded as unearned revenue on July 1. The revenue account will be credited by the 6 months revenue amount and unearned revenue account will be debited to reduce the amount by the six month accrual.

    Total Unearned revenue = $10,960

    Unearned revenue per month = $10,960 / 12 = $913.33

    revenue for six months = 913.33 x 6 = $5,480
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