Record journal entries for the following transactions. (a) On December 1, $18,000 was received for a service contract to be performed from December 1 through April 30. Dec. 1 (b) Assuming the work is performed evenly throughout the contract period, prepare the adjusting journal entry on December 31. Dec. 31

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21 January, 06:29

Record journal entries for the following transactions. (a) On December 1, $18,000 was received for a service contract to be performed from December 1 through April 30. Dec. 1 (b) Assuming the work is performed evenly throughout the contract period, prepare the adjusting journal entry on December 31. Dec. 31

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Jaden · Answer 1

See explanation section

Explanation:

(a) December 1 Cash Debit $18,000

Unearned revenue Credit $18,000

Note: The company received the money in advance for a contract to do during December to April. Therefore, they received cash while a liability increased due to receiving advance money.

(b) December 31 Unearned revenue Debit $3,600

Service revenue Credit $3,600

Note: As the company started performing, after the completion of 1st month, i. e., December 1 to December 31, the advance money started expiring because of providing services. Moreover, as the service is performed evenly for 5 months, the 1st month's revenue = $ (18,000/5) = $3,600.