Date accounts and explanation debit credit dec 31

.
Date Accounts and Explanation Debit Credit
Dec. 31 Prepaid Insurance 1,300
Insurance Expense 1,300
To record prepaid insurance.
Dec. 1: Collected
$ 2 comma 000
cash in advance from customers. The service revenue will be earned
$ 500
monthly over the
four
-month
period ending
March 31
,
2017
.
Record the related adjusting entry at December 31,
2016
.
If the business had earned all the revenue related to the December 1 cash collected in advance from customers prior
to the end of the year, then no adjustment would be necessary. However, since the business earned only one month's
worth of the revenue, an adjusting entry is needed at December 31,
2016
to transfer the unearned portion of
$ 1 comma 500
(=
$ 2 comma 000
-
$ 500
)
from the revenue account to a liability. Go ahead and prepare the adjusting entry.
Date Accounts and Explanation Debit Credit
Dec. 31 Service Revenue 1,500
Unearned Revenue 1,500
To record unearned revenue.
Dec. 1: Collected
$ 6 comma 600
cash in advance from customers. The service revenue will be earned
$ 2 comma 200
monthly over the
three
-month
period ending
February 28

,
2017
.
Record the related adjusting entry at December 31,
2016
.
Similar to our entry from above, we must transfer the unearned portion of the cash collected in advance to customer
to a liability account as of December 31,
2016
.
In this case, only
$ 2 comma 200
of the
$ 6 comma 600
cash collected in advance has been earned. The remaining
$ 4 comma 400
(=
$ 6 comma 600
-
$ 2 comma 200
)
must be shifted from the Service Revenue account to the Unearned Revenue account.
To record unearned revenue.
Post the entries to the T-accounts, and show their balances at December 31,
2016
.
reference to show the ending balance of each account. You do not need to calculate or enter the balance of the Cash
account.)
Requirement 5. Compare the account balances in Requirements 3 and 4. They should be equal.
Compare the ending balances of the T-accounts you prepared in Requirement 3 with those of the T-accounts you
prepared in Requirement 4. Are the balances the same or different?
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(Click
the icon to view the T-accounts from Requirement 3.)
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(Click
the icon to view the T-accounts from Requirement 4.)
THE SAME! LAST QUESTION