The accounting records of Patricia Event Planning Service include the following select unadjusted balances on 31 December 2016: Salaries expense,$6,000;Service revenue: $20,000;Unearned revenue,$400;Supplies expense,$600;Rent expense,$300;Depreciation expense-equipment,$200. Later in December,she worked with a new client and provided event planning services for an upcoming event.When the event is complete in January 2017,she will collect the full amount of $2400 from her client.As of the end of December 2017,she rendered one-third of the services covered by the contract.She made the accrual adjustments.The final adjusted balance of Service revenue,as shown on the adjusted trial balance,should be a:
A)credit balance of $20,000
B)debit balance of $22,400
C)credit balance of $20,800
D)debit balance of $2400

Question

Quizplus · Accepted Answer

The unadjusted balance for Service Revenue is $20,000. However, Patricia has not yet provided all of the services covered by the $2,400 contract with her new client. As of the end of December 2016, she had only provided one-third of the services, or $800 worth. Therefore, she must accrue the remaining $1,600 of revenue earned but not yet received.

To adjust for this, Patricia should debit the Unearned Revenue account for $1,600 (to reduce its balance) and credit the Service Revenue account for $1,600 (to increase its balance). The final adjusted balance of Service Revenue will be $20,000 (the unadjusted balance) + $1,600 (the revenue accrued) = $20,800, which is a credit balance.

Therefore, the correct answer is C.

The Accounting Records of Patricia Event Planning Service Include the Following