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On October 1, the company received a $5,400 advance payment on services to be performed for one year. The services began imme
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The company receive $5,400 advance payment on service to be performed for 1 year.

The journal entry for unearned revenue received

Cash a/ c Dr 5,400

To unearned revenue 5,400

The company received $5,400 for 1 year service. 12 month in one year, the number of October 1st December 31st is 3 months.

Service costing from October 1st December 31st

= 5,400 × (3/12) = $1,350

The journal entry in 31st December for recording the event is

Unearned revenue a/c Dr 1,350

To revenue 1,350

The unearned revenue is debited with $1,350

Option debt to unearned revenue for $1,350 is CORRECT.

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