Question

Transaction Entries and Adjusting Entries Deluxe Building Services offers janitorial services on both a contract basis and an hourly basis. On January 1, Deluxe collected $42,000 in advance on a six-month contract for work to be performed evenly during the next six months. a. Provide the general journal entry on January 1 to record the receipt of $42,000 for contract work. b. Provide the adjusting entry to be made on January 31, for the contract work done during January. c. At January 31, a total of 40 hours of hourly rate janitor work was unbilled. The billing rate is $25 per hour. Provide the adjusting entry needed on January 31. (Note: The firm uses the account Fees Receivable to reflect amounts due but not yet billed.)

Answer 1

Answer:

Jan.1

Dr Cash $ 42,000

Cr Unearned Service Revenue $42,000

Jan.31

Dr Unearned Service Revenue $ 7,000

Cr Service Revenue $ 7,000

Jan.31

Dr Account Fees Receivable $1,000

Cr Service Revenue $1,000

Explanation:

Preparation of Journal Entries

Jan.1

Dr Cash $ 42,000

Cr Unearned Service Revenue $42,000

(To record 6 month contract)

Jan.31

Dr Unearned Service Revenue $ 7,000 (42,000*1/6)

Cr Service Revenue $ 7,000

(To record january service fees earned on contract)

Jan.31

Dr Account Fees Receivable $1,000 ($40hours*$25 per hour)

Cr Service Revenue $1,000

(To record unbilled service fees at January 31)