ABC Catering received $800 cash from a customer for catering services to be provided next month. Given the choices below, determine the general journal entry that ABC Catering will make to record the cash receipt. Assume the company's policy is to initially record prepaid and unearned items in balance sheet accounts.
A) $\begin{array} { | l | r | r | }
\hline \text { Unearned Catering Revenue } & 800 & \
\hline \text { Catering Revenue } & & 800 \
\hline
\end{array}$
B) $\begin{array} { | l | r | r | }
\hline \text { Cash } & 800 & \
\hline \text { Accourts Receivable } & & 800 \
\hline
\end{array}$
C) $\begin{array}{|l|r|r|}
\hline \text { Cash } & 800 & \
\hline \text { Unearned Catering Revenue } & & 800 \
\hline
\end{array}$
D) $\begin{array} { | l | r | r | }
\hline \text { Cash } & 800 \
\hline \text { Catering Reverue } & & 800 \
\hline
\end{array}$
E) $\begin{array} { | l | r | r | }
\hline \text { Accourts Receivable } & 800 \
\hline \text { Catering Reverue } & & 800 \
\hline
\end{array}$

Question

ABC Catering received $800 cash from a customer for catering services to be provided next month. Given the choices below, determine the general journal entry that ABC Catering will make to record the cash receipt. Assume the company's policy is to initially record prepaid and unearned items in balance sheet accounts.
A) $\begin{array} { | l | r | r | } 
\hline \text { Unearned Catering Revenue } & 800 & \
\hline \text { Catering Revenue } & & 800 \
\hline
\end{array}$
B) $\begin{array} { | l | r | r | } 
\hline \text { Cash } & 800 & \
\hline \text { Accourts Receivable } & & 800 \
\hline
\end{array}$
C) $\begin{array}{|l|r|r|}
\hline \text { Cash } & 800 & \
\hline \text { Unearned Catering Revenue } & & 800 \
\hline
\end{array}$
D) $\begin{array} { | l | r | r | } 
\hline \text { Cash } & 800 \
\hline \text { Catering Reverue } & & 800 \
\hline
\end{array}$
E) $\begin{array} { | l | r | r | } 
\hline \text { Accourts Receivable } & 800 \
\hline \text { Catering Reverue } & & 800 \
\hline
\end{array}$

Quizplus · Accepted Answer

The cash received for services to be rendered next month indicates a prepayment or an unearned amount. Therefore, the company will initially record the cash receipt as unearned revenue which is a liability account. The entry is debit cash for $800 and credit unearned catering revenue for $800. Option C is the only entry that includes a debit to cash and a credit to unearned catering revenue.

ABC Catering Received $800 Cash from a Customer for Catering