On Dec 12, 2014, Ivory Coast, CGA, received $5,000 from a customer as an advance payment for accounting work to be done.The payment was credited to Accounting Revenue. Thirty percent of the work was performed in December 2014, with the rest to be done in January 2015, at which time the customer will be billed.The required adjusting entry at December 31, 2014 (year end)is
A)Dr Unearned Revenue $1,500, Cr Accounting Revenue $1,500.
B)Dr Accounting Revenue $1,500, Cr Unearned Revenue $1,500.
C)Dr Accounting Revenue $3,500, Cr Unearned Revenue $3,500.
D)Dr Unearned Revenue $3,500, Cr Accounting Revenue $3,500.

Question

Quizplus · Accepted Answer

The initial entry incorrectly credited the entire $5,000 to Accounting Revenue. Since only 30% of the work was completed by December 31, 2014, $1,500 (30% of $5,000) should be recognized as revenue. The remaining $3,500 should be adjusted as unearned revenue, requiring a debit to Accounting Revenue and a credit to Unearned Revenue for $3,500.

On Dec 12, 2014, Ivory Coast, CGA, Received $5,000 from a Customer