Adjusting entry to account for the work performed from October 1 through December 31, 2016:
It is given that Tao co. Receives $10,000 cash in advance for four months of legal services on October 1, 2016, and records it by debiting cash and crediting unearned revenue both for $10,000.
It is now December 31, 2016, and tao has provided legal services as planned so now we need to recognize the revenue for the period of Oct 1 to Dec. 31 (3 months), which shall be (10000*3/4) = $7,500
The Adjusting entry account for the work performed from October 1 through December 31, 2016, shall be as follows:
Unearned revenue Debit $7,500
Revenue Credit $7,500
(Being adjustment made for the revenue earned)
