Question

The company received an advance payment of 15000$ cash from a customer for remodeling work as of December 31, only one remodeling project has been worked on and completed. The 5570$ fee for project had been received in advance and recorded as remodeling fees earned earned

Answer 1

Answer:

The company should record it as unearned revenue.

Explanation:

Unearned revenue is the one which is received but services are not rendered. The cash has been received but the service is yet to be delivered. The financial transaction is recorded as prepayment or unearned revenue in the financial statements. When the services are rendered and the contract is completed an adjusting entry is made to record the final transaction. In the given scenario $5570 fee of the project has been received in advance and the company is recording remodeling fees earned. This should be recorded as unearned revenue till the services are completed.