Question

GreenLawn Co. provides landscaping services to clients. On May 1, a customer paid GreenLawn $60,000 for 6-months services in advance. GreenLawnâs general journal entry to record this transaction will include a:
Multiple Choice

Debit to Unearned Revenue for $60,000.

Credit to Cash for $60,000.

Credit to Unearned Revenue for $60,000.

Debit to Accounts Receivable for $60,000.

Credit to Accounts Receivable for $60,000.

Answer 1

Answer:

Credit to Unearned Revenue for $60,000.

Explanation:

Journal Entry of $60,000 for 6-months services in advance ia as follow:

                                        Dr.                     Cr.

Cash                           $60,000

Unearned Revenue                             $60,000

Services are not performed by GreenLawn Co. so the amount received will be considered as a liability and It will be named as unearned revenue. Cash received will be debited to the cash account. After the performance of service  of each month the revenue will be recognized and transferred from unearned revenue account to service revenue account.