Date Accounts and Explanation Debit Credit Dec 31 Prepaid Insurance 1300

Date accounts and explanation debit credit dec 31

This preview shows page 11 - 13 out of 13 pages.

. 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
Image of page 11
, 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 200of the $ 6 comma 600cash 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? LOADING...
Image of page 12
(Click the icon to view the T-accounts from Requirement 3.) LOADING... (Click the icon to view the T-accounts from Requirement 4.) THE SAME! LAST QUESTION
Image of page 13

You've reached the end of your free preview.

Want to read all 13 pages?

  • Fall '10
  • MANAGE
  • Revenue, Prepaid rent, Generally Accepted Accounting Principles, Double-entry bookkeeping system, Service Revenue

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture