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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Service Revenue

Kibitz Fitness received S30000 from customers on August l, 2019. These payments were advance payments of yearly membership dues.

Required:

At December 31, 2019, calculate what the balances in the Unearned Service Revenue and Service

Revenue accounts will be.

To determine

Service Revenue:

The service revenue is said to be earned when the service is provided or performed. The services which are not performed but for those services, the amount is received in advance then such amount is known as unearned service revenue.

To calculate:

The unearned service revenue and service revenue accounts.

Explanation

As the Kibitz Fitness closes its accounts on December 31,2019 and the revenue of $30,000 is received from customers in advance on August 1,2019 for the membership fees for the year.

So, the service revenue will be recognised for the five months as earned service revenue:

Service Revenue=$30,000×512=$12,500

The remaining seven months revenue will be recognised as unearned service revenue as it is already received but its respective services are not provided

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