Question

On November 15, Paulson Painting received a $6,000 cash payment from Apex Inc. in exchange for painting services to be provided in December. When posting the journal entries related to this payment, Paulson's accountant debits the Cash account for $6,000 and credits Service Revenue for $6,000. Which of the following statements best describes the results of this posting?
a. In Paulson's general ledger, the ending balances for both the Cash account and the Service Revenue account will be correct.
b. In Paulson's general ledger, the ending balance for the Cash account will be too low, the ending balance for the Service Revenue account will be too low, and the ending balance for the Unearned Service Revenue account will be too high
c. In Paulson's general ledger, the ending balance for the Cash account will be correct. However, the ending balance for the Service Revenue account will be too high and the ending balance for the Unearned Service Revenue account will be too low
d. In Paulson's general ledger, the ending balances for the Cash and Service Revenue accounts will be too high. However, the ending balance for the Unearned Service Revenue account will be too low.

Answer 1

Answer:

c. In Paulson's general ledger, the ending balance for the Cash account will be correct. However, the ending balance for the Service Revenue account will be too high and the ending balance for the Unearned Service Revenue account will be too low

Explanation:

Around 15th November, Paulson Painting endured a $6,000 cash amount from Apex Inc. in replacement for painting services to be rendered in the month of December. While posting the journal insertions correlated to this amount, Paulson's controller debits the Cash statement for $6,000 as well as charges Service Revenue toward $6,000. The statement which best describes the results of this posting is that, in Paulson's general ledger, the ending balance for the Cash account will be accurate. Nevertheless, the ending balance regarding the Service Revenue account will remain extremely high as well as the ending balance for the Unearned Service Revenue account will remain extremely low.