{"id":179247,"date":"2024-12-30T10:24:54","date_gmt":"2024-12-30T10:24:54","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=179247"},"modified":"2024-12-30T10:24:56","modified_gmt":"2024-12-30T10:24:56","slug":"a-on-november-1-2021-la-services-company-received-12000-in-advance-of-performing-the-services-from-a-customer-for-next-three-months-of-service","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2024\/12\/30\/a-on-november-1-2021-la-services-company-received-12000-in-advance-of-performing-the-services-from-a-customer-for-next-three-months-of-service\/","title":{"rendered":"a On November 1, 2021, LA Services Company received $12,000 in advance of performing the services from a customer for next three months of service"},"content":{"rendered":"\n<p>a On November 1, 2021, LA Services Company received $12,000 in advance of performing the services from a customer for next three months of service; November and December 2021 and January 2022. On November 1, 2021, LA Services Company recorded $12,000 as Unearned Revenue for this transaction. What would be the journal entry to adjust the accounts on December 31, 2021? Debit Unearned Revenue $12,000, and credit Service Revenue $12.000. Debit Service Revenue $4,000, and credit Unearned Revenue $4,000. Debit Service Revenue $4,000, and credit Accounts Receivable $4,000. Debit Unearned Revenue $8,000, and credit Service Revenue $8,000.<\/p>\n\n\n\n<p><strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-ast-global-color-6-color\">The Correct Answer and Explanation is :<\/mark><\/strong><\/p>\n\n\n\n<p>The correct journal entry to adjust the accounts on December 31, 2021, is:<\/p>\n\n\n\n<p><strong>Debit Unearned Revenue $8,000<\/strong><\/p>\n\n\n\n<p><strong>Credit Service Revenue $8,000<\/strong><\/p>\n\n\n\n<p><strong>Explanation:<\/strong><\/p>\n\n\n\n<p>On November 1, 2021, LA Services Company received $12,000 in advance for services to be provided over three months: November, December, and January. This advance payment was initially recorded as Unearned Revenue, a liability account, reflecting the company&#8217;s obligation to deliver services in the future.<\/p>\n\n\n\n<p>As the company performs the services, it earns the revenue, necessitating an adjustment to recognize the earned portion and reduce the liability.<\/p>\n\n\n\n<p><strong>Calculating Monthly Revenue:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Total advance payment: $12,000<\/li>\n\n\n\n<li>Service period: 3 months (November, December, January)<\/li>\n\n\n\n<li>Monthly revenue earned: $12,000 \u00f7 3 = $4,000<\/li>\n<\/ul>\n\n\n\n<p><strong>Revenue Earned by December 31, 2021:<\/strong><\/p>\n\n\n\n<p>By December 31, 2021, services for November and December have been completed.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Revenue earned in November: $4,000<\/li>\n\n\n\n<li>Revenue earned in December: $4,000<\/li>\n\n\n\n<li>Total revenue earned by December 31, 2021: $4,000 + $4,000 = $8,000<\/li>\n<\/ul>\n\n\n\n<p><strong>Adjusting Entry on December 31, 2021:<\/strong><\/p>\n\n\n\n<p>To reflect the earned revenue and reduce the unearned revenue liability, the following adjusting entry is made:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Debit Unearned Revenue $8,000<\/strong>: This decreases the liability, acknowledging that $8,000 of the previously unearned revenue has now been earned.<\/li>\n\n\n\n<li><strong>Credit Service Revenue $8,000<\/strong>: This increases the revenue account, recognizing the income earned from services provided in November and December.<\/li>\n<\/ul>\n\n\n\n<p>This adjustment ensures that the financial statements accurately represent the company&#8217;s financial position as of December 31, 2021, by:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Reducing the Unearned Revenue liability to reflect only the amount related to services yet to be performed (i.e., $4,000 for January).<\/li>\n\n\n\n<li>Recognizing Service Revenue for the services already rendered, aligning with the accrual basis of accounting, which records revenues when earned, regardless of when cash is received.<\/li>\n<\/ul>\n\n\n\n<p>By making this adjusting entry, LA Services Company ensures compliance with accounting principles, providing stakeholders with an accurate depiction of earned revenues and remaining obligations.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>a On November 1, 2021, LA Services Company received $12,000 in advance of performing the services from a customer for next three months of service; November and December 2021 and January 2022. On November 1, 2021, LA Services Company recorded $12,000 as Unearned Revenue for this transaction. What would be the journal entry to adjust [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-179247","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/179247","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=179247"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/179247\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=179247"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=179247"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=179247"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}