Question

at the beginning of the year, modish advertising owed customers $2,100 for unearned revenue collected in advance. during the year, modish received advance cash receipts of $6,100 and earned $20,000 of service revenue (exclusive of any amount earned from advance payments). at year - end, the liability for unearned revenue is $3,100 and unadjusted service revenue is $20,000. read the requirements. requirement 1. record the adjusting entry assuming that modish records the cash receipt of unearned revenue by initially crediting a liability account. post the adjusting entry to the unearned revenue and service revenue t - accounts. make sure to include the beginning balance and additional unearned revenue in the unearned revenue t - account. begin by recording the adjusting entry assuming that modish records unearned revenue by initially crediting a liability account. (record debits first, then credits. select the explanation on the last line of the journal entry.) date accounts and explanation debit credit unearned revenue 5100 service revenue 5100 post the adjusting entry to the unearned revenue and service revenue t - accounts. make sure to include the beginning balance and additional unearned revenue in the unearned revenue t - account. (use an \unadj. bal.\ reference to show the balance of each account prior to any adjustments or cash receipts. use a \bal.\ posting reference to show the ending balance of each account.) unearned revenue unadj. bal. 2100

Explanation:

Step1: Calculate amount of unearned revenue earned

The beginning unearned revenue was $2,100 and additional unearned revenue received during the year was $6,100, giving a total of $2,100 + $6,100=$8,200. The ending unearned - revenue liability is $3,100. So the amount of unearned revenue that has been earned is $8,200 - $3,100 = $5,100.

Step2: Record adjusting journal entry

To record the earned portion of unearned revenue, we debit Unearned Revenue (to reduce the liability) and credit Service Revenue (to recognize the revenue). The amount is $5,100.

Answer:

Date	Accounts and Explanation	Debit	Credit
	Service Revenue		5100

Unearned Revenue T - account:

Description	Amount
Addtl unearned	6100
Adj. entry (Debit)	5100
Bal.	3100

Service Revenue T - account:

Description	Amount
Adj. entry (Credit)	5100
Bal.	25100