Question

Check 3 10 points For each separate case below, follow the three-step process for adjusting the unearned revenue liability account at December 31 Step 1: Determine what the current account balance equals Step 2: Determine what the current account balance should equal, Step 3: Record the December 31 adjusting entry to get from step 1 to step 2 Assume no other adjusting entries are made during the year eBook Hir References a. Too Co. receives $10,000 cash in advance for four months of evenly planned legal services beginning on October 1. Tao records it by debiting Cash and crediting Unearned Ravenue both for $10,000, it is now December 31, and Tao has provided legal services as planned. What adjusting entry should To make to account for the work performed from October 1 through December 317 Unearned revenue Step 1: Determine what the current account balance equals Step 2: Determine what the current account balance should equal Step 3: Record the December 31 adjusting entry to get from top 1 to stop 2 b. Caden started a new publication called Contest News. Its subscribers pay $24 to receive 12 monthly issues. With every new subscriber, Caden debits Cash and credits Uncamed Subscription Revenue for the amounts received. The company has 100 new subscribers as of July 1. It sends Contest News to each of these subscribers every month from July through December. Assume no changes in subscribers, prepare the year-end journal entry that Caden must make as of December 31 to adjust the Subscription Revenue account and the Unearned Subscription Revenue account

Answer 1

a
			Unearned Revenue
Step 1: Current account balance equals	10000	Credit		10000
			7500
Step 2: Current account balance should equal	2500	Credit		2500
Step 3:
Unearned revenue	7500
Legal services revenue		7500
b
			Unearned Subscription Revenue
Step 1: Current account balance equals	2400	Credit		2400
			1200
Step 2: Current account balance should equal	1200	Credit		1200
Step 3:
Unearned Subscription revenue	1200
Subscription revenue		1200