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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

Softball Magazine Company received advance payments of $75,000 from customers during

2019. At December 31, 2019, $20,000 of the advance payments still had not been earned.

Required:

After the adjustments are recorded and posted at December 31, 2019, calculate what the balances will be in the Unearned Magazine Revenue and Magazine Revenue accounts.

Use the following information for Cornerstone Exercises 5-23 and 5-24:

Bolton sold a customer service contract with a price of S37 000 to Sammy’s Wholesale Company. Bolton offered terms of 1/10, n/30 and expects Sammy to pay within the discount period.

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 magazine revenue and magazine revenue accounts.

Explanation

As the Softball magazine closes its accounts on December 31,2019 and the revenue of $75,000 is received from customers in advance during 2019 year for the magazines.

So, the magazine revenue will be recognised:

Magazine Revenue=Total amountUnearned magazine revenue=$75,000"

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