Question

Tomlin and Company provide music for special occasions. On January 14th, the Garcia family hired Tomlin for an upcoming wedding for an agreed-upon fee of $5,000. The wedding was scheduled for May 23rd. As part of the agreement, the Garcias paid Tomlin half of the fee at the end of April with the remaining amount due by the end of June. Assuming Tomlin provided the service and properly keeps his books cach month, how would Tomlin record the receipt of the final payment in June? Multiple Choice Credit to Cash Credit to Account receivable Credit to Service revenue Debit to Uneamed revenue

Answer 1

On May 23rd , Tomlin and company has been provided the service completely while half of service payment will be received in end of june as per agreement. But service revenue has been already recognised in May month as per accured basis accounting which half payment will be received in june month . In month may ,Tomlin and company have balance of $2500($5000 X 50%) as Account receivables because they have just received half of payment of service provided .therefore on getting payment in june

Journal entry will be

Debit : Cash $2500

Credit: Account receivables $2500

Option (B) is correct.