Tao co. Receives $10,000 cash in advance for four months of legal services on october 1, 2016, and records it by debiting cash and crediting unearned revenue both for $10,000. It is now december 31, 2016, 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, 2016?

Adjusting entry to account for the work performed from October 1 through December 31, 2016:

It is given that Tao co. Receives $10,000 cash in advance for four months of legal services on October 1, 2016, and records it by debiting cash and crediting unearned revenue both for $10,000.

It is now December 31, 2016, and tao has provided legal services as planned so now we need to recognize the revenue for the period of Oct 1 to Dec. 31 (3 months), which shall be (10000*3/4) = $7,500

The Adjusting entry account for the work performed from October 1 through December 31, 2016, shall be as follows:

Unearned revenue Debit $7,500

Revenue Credit $7,500

(Being adjustment made for the revenue earned)