Question

15 PTS: QUESTION 6 - SERVICE CONTRACTS / AGREEMENTS 2 PARTS) On October 1, 2019 GOOD LAWNS, INC and PENNY PALS COMPANY entered into a 2 year agreement. GOOD LAWNS will provide monthly landscaping services to PENNY PALS at a cost of $500 per month **PART 1: REQUIRED" How much landscaping revenue should GOOD LAWNS record for each time period below (assume accrual basis): . Over the entire 2 year contract • Revenue for 2019? • Revenue for 2020? • Revenue for 2021? PENNY PALS pays $2,000 at the start of the contract on October 1, 2019. The monthly services are performed according to the contract terms at the agreed amount of $500/month. There have been no adjustments made to the books since the initial cash payment **Part 2 REQUIRED** What is the amount of Accounts Receivable and Unearned Revenue for GOOD LAWN at each of the following balance sheet dates: (Write zero or none if there is no amount). TAccounts and journal entries are not required, but can be helpful if you're unsure how to approach this. 12/31/19 Accounts Receivable Unearned Revenue 3/31/20 Accounts Receivable Unearned Revenue

Answer 1

Part 1
Recording of landscaping revenue by GOOD LAWNS
Over the entire 2 year contract			$ 12,000.00	($ 500 x 24, i.e., for 2 years or 24 months)
Revenue for 2019			$   1,500.00	($ 500 x 3, i.e., 3 months)
Revenue for 2020			$   6,000.00	($ 500 x 12, i.e., for 1 year or 12 months)
Revenue for 2021			$   4,500.00	($ 500 x 9, i.e., for 9 months)

Part 2
12/31/19
Accounts Receivable		zero
Unearned Revenue		$    500.00	(PENNY PALS paid $ 2000 but received service only for 3 months, i.e., of amount $ 500 x 3)
3/31/2020
Accounts Receivable		$ 1,000.00	(PENNY PALS paid $ 2000 but received service for 6 months, i.e., of amount $ 500 x 6)
Unearned Revenue		zero