During June, Bravo Magazine sold for cash six advertising spaces for $400 each to be run in the July through December issues. On
that date, Bravo properly recognized Unearned Revenue. The adjusting entry to record on July 31 includes:
a) a debit to Cash for $2,000
b) a debit to Unearned Revenue for $400
c) a credit to Revenue for $2,000
d) a credit to Unearned Revenue for $400
a) a debit to Cash for $2,000
b) a debit to Unearned Revenue for $400
c) a credit to Revenue for $2,000
d) a credit to Unearned Revenue for $400
1 answer:
Answer:
b.
Explanation:
The company sold 6 advertising spaces that would run from July to December for $400 each.
Total amount received for selling 6 advertising spaces = 6×$400
Total amount received for selling 6 advertising spaces = $2,400
The advertising spaces will run for 6 months i.e., July to December.
So, adjusting entry on 31st July would record the revenue earned for 1 month only.
Total revenue = $2,400
No. of months = 6
Revenue for 1 month = $2,400/6
Revenue for 1 month = $600
Thus, journal entry on receipt of cash as well as adjusting journal entry has been shown below:
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