On August 1 of the current year, Magic Carpet Entertainment received $4,800 for services to be performed evenly over the next twelve months. The adjusting entry on December 31, 2008, would include a:

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The adjusting entry on December 31, 2008, would include a debit to Unearned Service Revenue for $2,000. This is because $4,800 was received on August 1 for services to be performed evenly over the next twelve months. As of December 31, 2008, four months have passed, so 4/12 of the services have been performed. This means that $4,800 x 4/12 = $2,000 of the unearned service revenue has been earned and should be recognized as service revenue.

On August 1 of the Current Year, Magic Carpet Entertainment