Duluth Co.collected a $6,000 cash advance from a customer on November 1,2016 for work to be performed over a six-month period beginning on that date.If the year-end adjustment is properly recorded,what will be the effect of the adjusting entry on Duluth's 2016 financial statements?
A)Increase assets and decrease liabilities
B)Increase assets and increase revenues
C)Decrease liabilities and increase revenues
D)No effect

Question

Quizplus · Accepted Answer

The adjusting entry will decrease liabilities (unearned revenue) and increase revenues, as part of the advance payment will be recognized as revenue for the work performed by the end of 2016.

Duluth CoCollected a $6,000 Cash Advance from a Customer on November