Stanley Fuel Services records $8,000 of service revenue being received in advance and $4,500 of service revenue being accrued. Unearned revenue has a year-end balance of $4,900. The effect of these entries on total service revenue for the year is an increase of:

Question

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Unearned revenue is a liability account that represents services that have been paid for but not yet performed. When service revenue is received in advance, it is recorded as a credit to unearned revenue. When the service is performed, the unearned revenue is reduced and service revenue is increased. In this case, Stanley Fuel Services recorded $8,000 of service revenue being received in advance, which means that unearned revenue increased by $8,000. Additionally, Stanley Fuel Services recorded $4,500 of service revenue being accrued, which means that service revenue increased by $4,500. The effect of these entries on total service revenue for the year is an increase of $8,000 + $4,500 = $12,500. However, the question asks for the increase in total service revenue, not the total amount of service revenue. Since unearned revenue has a year-end balance of $4,900, this means that $4,900 of the $12,500 increase in service revenue is still unearned. Therefore, the increase in total service revenue for the year is $12,500 - $4,900 = $7,600.

Stanley Fuel Services Records $8,000 of Service Revenue Being Received