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Answer:
Option (a) is correct.
Explanation:
This is a case of third degree price discrimination.
There are three types of price discrimination are as follows:
(a) First degree price discrimination
(b) Second degree price discrimination
(c) Third degree price discrimination
In a third degree price discrimination, a company or a firm can charge different prices for different groups of people but charge the same price within the group.
In our case, Dry cleaning companies charge more prices from the women than from the men but they can charge the same price from all the women.
Answer:
A. Adjusting Journal Entries:
Dec. 31, 2019:
Debit Accounts Receivable $22,650
Credit Service Fee Revenue $22,650
To record fees earned, but not yet billed to clients.
B. No. If the cash basis rather than the accrual basis had been used, an adjusting entry would not have been necessary.
Explanation:
Adjusting entries are only required to align the cash-basis accounting records to the accrual basis. Adjustments are made for prepayments of expenses, unpaid expenses, deferred revenue, unearned earned and earned revenue, and depreciation charges. For an entity operating on a cash basis, adjusting entries are not required.
Adjusting entries ensure that accounting records comply with the accrual concept and matching principle of generally accepted account practises. The requirement under this concept with the matching principle is to accrue and match expenses and revenue to the related revenue and expenses and period.
