Horngren's Accounting Plus Mylab Accounting With Pearson Etext -- Access Card Package (12th Edition)
12th Edition
ISBN: 9780134674681
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
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Textbook Question
Chapter 3, Problem E3A.32E
Understanding the alternative treatment of unearned revenues
Learning Objectives 3, 7 Appendix 3A |
At the beginning of the year, Modish Advertising owed customers $2, 100 for unearned revenue collected in advance. During the year, Modish received advance cash receipts of $6, 100 and earned $20,000 of service revenue (exclusive of any amount earned from advance payments). At year-end, the liability for unearned revenue is $3, 100 and unadjusted service revenue is $20,000.
Requirements
- Record the
adjusting entry assuming that Modish records the cash receipt of unearned revenue by initially crediting a liability account.Post the adjusting entry to the Unearned Revenue and Service Revenue T-accounts. Make sure to include the beginning balance and additional unearned revenue in the Unearned Revenue T-account. - Record the adjusting entry assuming that Modish records the cash receipt of unearned revenue by initially crediting a revenue account. Post the adjusting entry to the Unearned Revenue and Service Revenue T-accounts. Make sure to include the beginning balance in the Unearned Revenue T-account and the additional unearned revenue in the Service Revenue T-account.
- Compare the ending balances of the T-accounts under both approaches. Are they the same?
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Chapter 3 Solutions
Horngren's Accounting Plus Mylab Accounting With Pearson Etext -- Access Card Package (12th Edition)
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