Chateau Corporation has reported pre-tax income of $250,000 on December 31, 2021, before considering the transactions and events noted below. Prepare the adjusting entries needed at December 31, 2021 in order to correctly report Chateau's pre-tax income for the year. ( 1) On September 1, 2021, Chateau signed a one-year, $36,000 note payable with interest of 7%. The note, plus accrued interest, is due on August 31, 2022. 2) On May 31, 2021, Chateau entered into a contract to provide services to a customer for eighteen months, beginning on June 1. The customer paid the $27,000 fee in full on June 1, and Chateau recorded the payment as unearned revenue.
Chateau Corporation has reported pre-tax income of $250,000 on December 31, 2021, before considering the transactions and events noted below. Prepare the
1) On September 1, 2021, Chateau signed a one-year, $36,000 note payable with interest of 7%. The note, plus accrued interest, is due on August 31, 2022.
2) On May 31, 2021, Chateau entered into a contract to provide services to a customer for eighteen months, beginning on June 1. The customer paid the $27,000 fee in full on June 1, and Chateau recorded the payment as unearned revenue.
Unearned revenue is the revenue which a business has not earned during period but the amount has been received in advance by company from the customer or client.
The portion of unearned revenue becomes revenue when the services or the products is delivered to the customer.
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