Unearned Revenue Adjusting Entries Olney Cleaning Company had the following items that require adjustment at year-end: a. For one cleaning contract, $18,600 cash was received in advance. The cash was credited to Unearned Service Revenue upon receipt. At year-end, $3,930 of the service revenue was still unearned. b. For another cleaning contract, $11,940 cash was received in advance and credited to Unearned Service Revenue upon receipt. At year-end, $4,280 of the services had been provided. Required: 1. Prepare the adjusting entries needed at December 31. Dec. 31 Unearned Service Revenue 14,670 Service Revenue 14,670 (Record earned revenue) Dec. 31 Unearned Service Revenue 11,940 Service Revenue 11,940 (Record earned revenue) 2. What is the effect on the financial statements if these adjusting entries are not made? and liabilities would be understated This would result If these adjusting entries were not made, revenue would be understated in an overstatement of net income and an overstatement of shareholders' equity. 3. What is the balance in Unearned Service Revenue at December 31 related to the two cleaning contracts? 11,140

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Unearned Revenue Adjusting Entries
Olney Cleaning Company had the following items that require adjustment at year-end:
a. For one cleaning contract, $18,600 cash was received in advance. The cash was credited to Unearned Service Revenue upon receipt. At
year-end, $3,930 of the service revenue was still unearned.
b. For another cleaning contract, $11,940 cash was received in advance and credited to Unearned Service Revenue upon receipt. At year-end,
$4,280 of the services had been provided.
Required:
1. Prepare the adjusting entries needed at December 31.
Dec. 31 Unearned Service Revenue
14,670
Service Revenue
14,670
(Record earned revenue)
Dec. 31 Unearned Service Revenue
11,940
Service Revenue
11,940
(Record earned revenue)
2. What is the effect on the financial statements if these adjusting entries are not made?
and liabilities would be understated
This would result
If these adjusting entries were not made, revenue would be understated
in an overstatement
of net income and an overstatement
of shareholders' equity.
3. What is the balance in Unearned Service Revenue at December 31 related to the two cleaning contracts?
11,140
( Previous
Next
Transcribed Image Text:Unearned Revenue Adjusting Entries Olney Cleaning Company had the following items that require adjustment at year-end: a. For one cleaning contract, $18,600 cash was received in advance. The cash was credited to Unearned Service Revenue upon receipt. At year-end, $3,930 of the service revenue was still unearned. b. For another cleaning contract, $11,940 cash was received in advance and credited to Unearned Service Revenue upon receipt. At year-end, $4,280 of the services had been provided. Required: 1. Prepare the adjusting entries needed at December 31. Dec. 31 Unearned Service Revenue 14,670 Service Revenue 14,670 (Record earned revenue) Dec. 31 Unearned Service Revenue 11,940 Service Revenue 11,940 (Record earned revenue) 2. What is the effect on the financial statements if these adjusting entries are not made? and liabilities would be understated This would result If these adjusting entries were not made, revenue would be understated in an overstatement of net income and an overstatement of shareholders' equity. 3. What is the balance in Unearned Service Revenue at December 31 related to the two cleaning contracts? 11,140 ( Previous Next
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