(L.OBJ. 4) Preparing adjusting entries [15—25 min]
At the beginning of the year, Mode Advertising owed customers $2,500 for unearned service revenue collected in advance. During the year, Mode received advance cash receipts of $6,800. At year-end, the liability for unearned revenue is $3,800.
Requirements
1. Assume that Mode records unearned revenues by initially crediting a liability account. Enter the beginning balance in Unearned service revenue T-account journalize the cash collection and adjusting entries, and post their dollar amounts in the T-accounts. As references in the T-accounts, denote a cash receipt by CR, and an adjustment by Adj.
2. Assume that Mode records unearned revenues by initially crediting a revenue account. Enter the beginning balance in Service revenue T-account. Journalize the cash collection and adjusting entries, and post their dollar amounts in the T-accounts. As references in the T-accounts, denote a cash receipt by CR, and an adjustment by Adj.
3. Compare the ending balances in the two accounts.
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