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On June 1, the company collected $16,800 cash, which is for services to be performed over the next 12 months. For the following two separate cases, prepare the adjusting entry and determine the balance of Deferred Service Revenue at year-end. Case A: $16,800 was credited to Service Revenue during the year. Case B: $16,800 was credited to Deferred Service Revenue during the year.

Sagot :

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The preparation of the adjusting entry and the determination of the balance of the Deferred Service Revenue at year-end are as follows:

Case A Adjusting Entry:

Debit Service Revenue $7,000

Credit Deferred Service Revenue $7,000

  • To record the deferred revenue for next year.

Case B Adjusting Entry:

Debit Deferred Service Revenue $9,800

Credit Service Revenue $9,800

  • To record the service revenue for the year.

Transaction Analysis:

Case A: $16,800 was credited to Service Revenue during the year.

Service Revenue $7,000 Deferred Service Revenue $7,000 ($16,800 x 5/12)

June 1 to December 31 = 7 months; (12 - 7 = 5 months)

Case B: $16,800 was credited to Deferred Service Revenue during the year.

Deferred Service Revenue $9,800 Service Revenue $9,800 ($16,800 x 7/12)

Thus, Case A emphasized that the cash receipt of $16,800 was credited to Service Revenue, the adjustment is to Deferred Service Revenue, and vice versa for Case B.

Learn more about adjusting entries at https://brainly.com/question/13035559

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