Question

On january 1, the biddle & biddle, cpas received a $7,500 cash retainer for accounting services to be provided ratably over the next 3 months. the full amount was credited to the liability account unearned service revenue. assuming that the revenue is recognized ratably over the 3 month period, what adjusting journal entry should be made at january 31

Answer 1

Answer:

The answer is 2500.

Explanation:

It can be explained this way,

31st January, unearned service revenue in debit was 2500.

31st January, the credit was 2500 in credit.

Combining, it can be stated that the answer is 2500 in debit and credit.

Answer 2

Debit the unearned service revenue and credit the service revenue by $2,500.

Further Explanation:

Adjusting entries:

The trial balance may not reflect the accurate financial position of the company because it may not include up-to-date data. The adjusting entries are required to update the books of the company so it would reflect the accurate financial position of the company.

The adjusting entries are required in the following cases:

• The recognition of the expenses and revenue.
• The accurate depiction of the assets, liabilities, and owners’ equity.

Record the adjusting entry for the unearned service revenue:

The unearned service revenue account should be debited, and the service revenue account should be credited with $2,500 on January 31. The unearned service revenue should be debited because earlier it was credited, and the service revenue should be credited because the business will recognize the revenue on January 31.  

Working note:

Calculate the revenue for January:

$\begin{aligned}\text{Service recognized}&=\frac{\text{Total revenue}}{\text{Tenure}}\\&=\frac{\ 7,500}{3}\\&=\ 2,500 \end{aligned}$

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Answer Details:

Grade: Senior School

Chapter: Journal Entries

Subject: Accounting

Keywords: the biddle, biddle, cpas, received, cash, retainer, accounting, services, provided, ratably, next, months, full, amount, credited, liability, account, unearned, service, revenue, assuming, revenue, recognized, ratably, over.