Olney Cleaning Company had the following items that require adjustment at year end. For one cleaning contract, $11,100 cash was received in advance. The cash was credited to Unearned Service Revenue upon receipt. At year end, $260 of the service revenue was still unearned. For another cleaning contract, $8,700 cash was received in advance and credited to Unearned Service Revenue upon receipt. At year end, $3,000 of the services had been provided. Required: 1. Prepare the adjusting journal entries needed at December 31. If an amount box does not require an entry, leave it blank. Dec. 31 Unearned Service Revenue fill in the blank 02e1a8f7d03afe9_2 fill in the blank 02e1a8f7d03afe9_3 Service Revenue fill in the blank 02e1a8f7d03afe9_5 fill in the blank 02e1a8f7d03afe9_6 Dec. 31 Unearned Service Revenue fill in the blank 02e1a8f7d03afe9_8 fill in the blank 02e1a8f7d03afe9_9 Service Revenue fill in the blank 02e1a8f7d03afe9_11 fill in the blank 02e1a8f7d03afe9_12 Feedback 1. Revenue is recognized when it is earned, regardless of when cash is received. A deferred (unearned) revenue is a liability arising from the receipt of cash for which revenue has not yet been earned. As the revenue is earned, the liability should be adjusted. 2. What is the effect on the financial statements if these adjusting entries are not made? In both of these cases, a liability (unearned service revenue) was originally created when cash was received prior to the performance obligation being satisfied (prior to the revenue being earned). The adjusting entries recognize revenue and decrease the previously created liability by the amount of revenue earned during the period. If these adjusting entries were not made, revenue would be understated and liabilities (unearned revenue) would be overstated . In addition, the understatement of revenue would result in an understatement of net income. Finally, because revenue is then closed to Retained Earnings, stockholders’ equity will also be understated . 3. What is the balance in Unearned Service Revenue at December 31 related to the two cleaning contracts? $fill in the blank e2c0c400aff506a_1

Olney Cleaning Company had the following items that require adjustment at year end. For one cleaning contract, $11,100 cash was received in advance. The cash was credited to Unearned Service Revenue upon receipt. At year end, $260 of the service revenue was still unearned. For another cleaning contract, $8,700 cash was received in advance and credited to Unearned Service Revenue upon receipt. At year end, $3,000 of the services had been provided. Required: 1. Prepare the adjusting journal entries needed at December 31. If an amount box does not require an entry, leave it blank. Dec. 31 Unearned Service Revenue fill in the blank 02e1a8f7d03afe9_2 fill in the blank 02e1a8f7d03afe9_3 Service Revenue fill in the blank 02e1a8f7d03afe9_5 fill in the blank 02e1a8f7d03afe9_6 Dec. 31 Unearned Service Revenue fill in the blank 02e1a8f7d03afe9_8 fill in the blank 02e1a8f7d03afe9_9 Service Revenue fill in the blank 02e1a8f7d03afe9_11 fill in the blank 02e1a8f7d03afe9_12 Feedback 1. Revenue is recognized when it is earned, regardless of when cash is received. A deferred (unearned) revenue is a liability arising from the receipt of cash for which revenue has not yet been earned. As the revenue is earned, the liability should be adjusted. 2. What is the effect on the financial statements if these adjusting entries are not made? In both of these cases, a liability (unearned service revenue) was originally created when cash was received prior to the performance obligation being satisfied (prior to the revenue being earned). The adjusting entries recognize revenue and decrease the previously created liability by the amount of revenue earned during the period. If these adjusting entries were not made, revenue would be understated and liabilities (unearned revenue) would be overstated . In addition, the understatement of revenue would result in an understatement of net income. Finally, because revenue is then closed to Retained Earnings, stockholders’ equity will also be understated . 3. What is the balance in Unearned Service Revenue at December 31 related to the two cleaning contracts? $fill in the blank e2c0c400aff506a_1

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

Olney Cleaning Company had the following items that require adjustment at year end.

For one cleaning contract, $11,100 cash was received in advance. The cash was credited to Unearned Service Revenue upon receipt. At year end, $260 of the service revenue was still unearned.
For another cleaning contract, $8,700 cash was received in advance and credited to Unearned Service Revenue upon receipt. At year end, $3,000 of the services had been provided.

Required:

1. Prepare the adjusting journal entries needed at December 31. If an amount box does not require an entry, leave it blank.

Dec. 31	Unearned Service Revenue	fill in the blank 02e1a8f7d03afe9_2	fill in the blank 02e1a8f7d03afe9_3
	Service Revenue	fill in the blank 02e1a8f7d03afe9_5	fill in the blank 02e1a8f7d03afe9_6
Dec. 31	Unearned Service Revenue	fill in the blank 02e1a8f7d03afe9_8	fill in the blank 02e1a8f7d03afe9_9
	Service Revenue	fill in the blank 02e1a8f7d03afe9_11	fill in the blank 02e1a8f7d03afe9_12

Feedback

1. Revenue is recognized when it is earned, regardless of when cash is received. A deferred (unearned) revenue is a liability arising from the receipt of cash for which revenue has not yet been earned. As the revenue is earned, the liability should be adjusted.

2. What is the effect on the financial statements if these adjusting entries are not made?

In both of these cases, a liability (unearned service revenue) was originally created when cash was received prior to the performance obligation being satisfied (prior to the revenue being earned). The adjusting entries recognize revenue and decrease the previously created liability by the amount of revenue earned during the period. If these adjusting entries were not made, revenue would be understated and liabilities (unearned revenue) would be overstated . In addition, the understatement of revenue would result in an understatement of net income. Finally, because revenue is then closed to Retained Earnings, stockholders’ equity will also be understated .

3. What is the balance in Unearned Service Revenue at December 31 related to the two cleaning contracts?
$fill in the blank e2c0c400aff506a_1

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.