Question

how do i record the amount of service contract earned for Dec.31

12A. Perfomance Computers has the following transactions relaled to the sale of merchandise inventory A (Cick the ioon to view the transactions.) Joumalize the transactions for Performance Computers assuming that the company uses the perpetual inventory syslem. (Record debts frst, then credts. Select the explanation on the last Ine of the joumal entry table) Mar. 1: Sold a computer (cost of $4,125) for $11,000 to a customer. The customer paid cash. The sales price included a oneyear service contract valued at $180. Bogin by preparing the entry to joumalize the sale portion of the transaction. Do not record the expense relaled to the sale We will do that in the following step Date Accounts and Explanation Debit Credt Cash Mar 1 11,000 Sales Revenue 10.20 Unearned Reverue 160 More Info Cesh sale including a one year ervice centret Sold a computer (cost of $4,125) for $11.000 te a customer The cuatomer paid cash The sales price included a one year service conpact valued at S180 Recorded the amount of service contract eamed Now journalize the expense related to the March 1 sale-Cost of Goods Sod. $4,125 Mar. 1 Debit Credit Accounts and Explanation Date Dec. 31 4,125 Cost of Goods Sold Mar. 1 Merchandise inventory 4,125 Print Done Recorded the coet of goods sokd Dec 31 Recorded the amount of service contract eamed Debit Credit Accounts and Explanation Date Dec 31

Answer 1

On March 1, $180 service revenue was received in advance for 12 months period.

Hence, on December 31, service revenue has been earned for 10 months (March 1 to December 31).

Service revenue for 10 months = 180 x 10/12

= $150

The following adjusting entry should be made on December 31 for service revenue earned:

Date	Account title	Debit	Credit
Dec. 31	Unearned revenue	150
	Service revenue		150
	(To record service revenue earned)

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