Wave Inn is a resort located in Canada.Wave Inn collects cash when guests make a reservation.During December 2011, Wave Inn collected $60,000 of cash and recorded the receipt by recognizing revenue.By the end of the month Wave Inn had earned one third of this amount, the other two third will be earned during January 2012.The adjusting entry required at December 31, 2011 would impact the statement of financial position by

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Wave Inn initially recognized the entire $60,000 as revenue, but by the end of December, only $20,000 was earned. The remaining $40,000 should be deferred as unearned revenue, decreasing equity by $40,000.

Wave Inn Is a Resort Located in Canada