Question

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On July 1, 2020, Dobbs Co. pays $14,400 to Kalter Insurance Co. for a 3-year insurance contract. Both companies have fiscal years ending December 31. Journalize and post the entry on July 1 and the adjusting entry on December 31 for Kalter Insurance Co. Kalter uses the accounts Unearned Service Revenue and Service Revenue. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Date - Account Titles Debit Credit Unearned Service Revenue Service Revenue

Answer 1

Solution:

Question:1

1) Journal Entries

Date	General Journal	Debit	Credit
July 1,2020	Cash	$                14,400
	Unearned Service Revenue		$        14,400
	(Being Unearned Service Revenue )
December 31,2020	Unearned Service Revenue	$                  2,400
	Service Revenue		$          2,400
	(Being Service revenue earned )

2) T-Accounts:

Unearned Service Revenue
December 31,2020	$            2,400	July 1,2020	$         14,400
		End Balance	$         12,000
Service Revenue
		December 31,2020	$           2,400
		End Balance	$           2,400

Notes:

1) Service revenue was received for 3 years from July 1,2020  and 6 months have completed by December 31,2020. So, Current year earned service revenue is ( $14,400 / 36 Months) * 6 Months = $ 2,400.