Question

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. Tao Co. receives $11,200 cash in advance for four months of evenly planned legal services beginning on October 1. Tao records it by debiting Cash and crediting Unearned Revenue both for $11,200. It is now December 31, and Tao has provided legal services as planned. What adjusting entry should Tao make to account for the work performed from October 1 through December 31 Unearned revenue Stap 1: Determine what the current account balance equals Step 2. Determine what the current account balance should equal Step Record the December 31 adjusting entry to get from step to step 2.

Answer 1

1
				Unearned Revenue
Step 1 Current account balance equals	11200	Credit			11200
				8400
Step 2 Current account balance should equal	2800	Credit			2800
Step 3:
Unearned revenue	8400
Legal services revenue		8400
2
				Unearned Subscription Revenue
Step 1 Current account balance equals	3600	Credit			3600
				1800
Step 2 Current account balance should equal	1800	Credit			1800
Step 3:
Unearned subscription revenue	1800
Subscription revenue		1800