Dalton Delivery Service is hired on October 31,2016 to perform services,beginning on November 1,2016.The delivery services will be performed for six months at a rate of $3,000 per month.Dalton's fiscal year ends on December 31.What amount of service revenue should be recorded as an adjusting entry on December 31,2016?
A)$3,000
B)0
C)$6,000
D)$9,000

Question

Quizplus · Accepted Answer

According to the revenue recognition principle, revenue is recognized when the services are rendered, which means that Dalton Delivery Service should recognize $3,000 of revenue for the month of November 2016. However, since the services are being performed over a period of six months and part of the services have been performed in December 2016, Dalton should recognize an additional $3,000 for the month of December 2016, bringing the total amount of service revenue to $6,000. Therefore, the adjusting entry for service revenue on December 31, 2016, should be $6,000.

Dalton Delivery Service Is Hired on October 31,2016 to Perform