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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

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

Jennifer’s Landscaping Services signed a $400-per-month contract on November 1, 2019, to provide plant watering services for Lola Inc.’s office buildings. Jennifer’s received 4 months' service fees in advance on signing the contract.

Required:

1. Prepare Jennifer’s journal entry to record the cash receipt for the first 4 months.

2. Prepare Jennifer’s adjusting entry at December 31, 2019.

3. CONCEPTUAL CONNECTION How would the advance payment (account(s) and amounts(s)] be reported in Jennifer’s December 31, 2019, balance sheet? How would the advance payment [account(s) and amount(s)] be reported in Lola’s December 31, 2019, balance sheet?

To determine

Concept introduction:

Liabilities:

Liabilities are the obligation of the business or amount payable by the business. Liabilities can current or long term. Current liabilities are liabilities payable within the short term or business cycle of the company, for example Accounts payable for purchases and utilities payable. Long term liabilities are liabilities payable in a long period/ years, for example long term loan.

Requirement 1:

To prepare:

The journal entry to record the cash receipt.

Explanation

The journal entry to record the cash receipt is explained as follows:

Jennifer’s Landscaping Services
Journal Entries
# Date Account Titles
To determine

Concept introduction:

Liabilities:

Liabilities are the obligation of the business or amount payable by the business. Liabilities can current or long term. Current liabilities are liabilities payable within the short term or business cycle of the company, for example Accounts payable for purchases and utilities payable. Long term liabilities are liabilities payable in a long period/ years, for example long term loan.

Requirement 2:

To prepare:

The journal entry to record the revenue.

To determine

Concept introduction:

Liabilities:

Liabilities are the obligation of the business or amount payable by the business. Liabilities can current or long term. Current liabilities are liabilities payable within the short term or business cycle of the company, for example Accounts payable for purchases and utilities payable. Long term liabilities are liabilities payable in a long period/ years, for example long term loan.

Requirement 3:

To indicate

The recording of the Advance payment on the balance sheets of both the parties.

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