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Chapter 3: Q17SE_1 (page 161)

On September 1, 2018, Salem Landscaping collected $24,000 in advance from customers for landscaping services. The service revenue will be earned monthly over the 12-month period ending August 31, 2019. Requirements 1. Journalize the entry on September 1 by using the alternative treatment of deferred revenues. 2. Record the December 31, 2018 adjusting entry

Short Answer

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Date	Account and Explanation	Debit	Credit
01-09-2018	Cash	$24,000
	Service Revenue		$24,000
	To record amount collected from customer

Step by step solution

01

Step-by-Step SolutionStep 1: Explanation of Unearned Revenue

Unearned revenue refers to revenue received in advance from the customers, in which goods or services will be provided later.

02

Explanation of Entry

On September 1, 2018, the advance receipt will be recorded by debiting cash and crediting service revenue by $24,000, respectively, to record receipt of deferred revenue as an alternative treatment.

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Most popular questions from this chapter

Question :The unadjusted trial balance of Anniston Air Purification System at December 31, 2018, and the data needed for the adjustments follow ANNISTON AIR PURIFICATION SYSTEM Unadjusted Trial Balance December 31, 2018 Adjustment data at December 31 follow Account Title Prepaid Rent Cash Debit Credit Accounts Receivable Office Supplies Equipment Accumulated Depreciation—Equipment Accounts Payable Salaries Payable Unearned Revenue Common Stock Dividends Service Revenue Salaries Expense Rent Expense Depreciation Expense—Equipment Advertising Expense Supplies Expense Total Balance \( 7,600 \) 69,000 \( 69,000 22,000 43,800 3,100 15,300 19,700 2,900 1,800 \) 3,900 2,900 9,900 3,300 1,800 a. On December 15, Anniston contracted to perform services for a client receiving \(3,100 in advance. Anniston recorded this receipt of cash as Unearned Revenue. As of December 31, Anniston has completed \)2,100 of the services. b. Anniston prepaid two months of rent on December 1. (Assume the Prepaid Rent balance as shown on the unadjusted trial balance represents the two months of rent prepaid on December 1.) c. Anniston used \(750 of office supplies. d. Depreciation for the equipment is \)850. e. Anniston received a bill for December’s online advertising, \(1,100. Anniston will not pay the bill until January. (Use Accounts Payable.) f. Anniston pays its employees on Monday for the previous week’s wages. Its employees earn \)3,500 for a five-day workweek. December 31 falls on Wednesday this year. g. On October 1, Anniston agreed to provide a four-month air system check (beginning October 1) for a customer for $3,400. Anniston has completed the system check every month, but payment has not yet been received and no entries have been made. Requirements 1. Journalize the adjusting entries on December 31. 2. Using the unadjusted trial balance, open the T-accounts with the unadjusted balances. Post the adjusting entries to the T-accounts. 3. Prepare the adjusted trial balance. 4. How will Anniston Air Purification System use the adjusted trial balance?

On October 1, Orlando Gold Exchange paid cash of $57,600 for computers that are expected to remain useful for three years. At the end of three years, the value of the computers is expected to be zero. Requirements 1. Calculate the amount of depreciation for the month of October using the straightline depreciation method. 2. Record the adjusting entry for depreciation on October 31. 3. Post the purchase of October 1 and the depreciation on October 31 to T-accounts for the following accounts: Computer Equipment, Accumulated Depreciation— Computer Equipment, and Depreciation Expense—Computer Equipment. Show their balances at October 31. 4. What is the computer equipment’s book value on October 31?

Identify the impact on the income statement and balance sheet if adjusting entries for the following situations were not recorded. a. Office Supplies used, \(800. b. Accrued service revenue, \)4,000. c. Depreciation on building, \(3,500. d. Prepaid Insurance expired, \)650. e. Accrued salaries expense, \(2,750. f. Service revenue that was collected in advance has now been earned, \)130

Question :The unadjusted trial balance for All Mopped Up Company, a cleaning service, is as follows:ALL MOPPED UP COMPANY Unadjusted Trial Balance December 31, 2018 Account Title Prepaid Insurance Cash Debit Credit Office Supplies Equipment Accumulated Depreciation—Equipment Accounts Payable Salaries Payable Unearned Revenue Common Stock Dividends Service Revenue Salaries Expense Supplies Expense Depreciation Expense—Equipment Insurance Expense Total Balance \( 800 \) 45,400 \( 45,400 \) 2,000 15,300 25,000 2,000 600 30,000 2,400 700 5,000 7,000 A, During the 12 months ended December 31, 2018, All Mopped Up: a. used office supplies of \(1,700. b. used prepaid insurance of \)580. c. depreciated equipment, \(500. d. accrued salaries expense of \)310 that hasn’t been paid yet. e. earned $400 of unearned revenue. Requirements 1. Open a T-account for each account using the unadjusted balances. 2. Journalize the adjusting entries using the letter and December 31 date in the date column. 3. Post the adjustments to the T-accounts, entering each adjustment by letter. Show each account’s adjusted balance.

Question :The accounting records of Mackay Architects include the following selected, unadjusted balances at March 31: Accounts Receivable, \(1,500; Office Supplies, \)700; Prepaid Rent, \(2,240; Equipment, \)8,000; Accumulated Depreciation—Equipment, \(0; Salaries Payable, \)0; Unearned Revenue, \(900; Service Revenue, \)4,100; Salaries Expense, \(800; Supplies Expense, \)0; Rent Expense, \(0; Depreciation Expense—Equipment, \)0. The data developed for the March 31 adjusting entries are as follows: a. Service revenue accrued, \(700. b. Unearned revenue that has been earned, \)100. c. Office Supplies on hand, \(300. d. Salaries owed to employees, \)200. e. One month of prepaid rent has expired, \(560. f. Depreciation on equipment, \)120. Requirements 1. Open a T-account for each account using the unadjusted balances given. 2. Journalize the adjusting entries using the letter and March 31 date in the date column. 3. Post the adjustments to the T-accounts, entering each adjustment by letter. Show each account’s adjusted balance.

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