ACCOUNTING PRINCIPLES V1 6/17 >C<
3rd Edition
ISBN: 9781323761434
Author: Horngren
Publisher: PEARSON C
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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
ACCOUNTING PRINCIPLES V1 6/17 >C<
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