Jack's Snow Removal Company received a cash advance of $14,400 on December 1, Year 1 to provide services during the months of December, January, and February. The year-end adjustment on December 31, Year 1, to recognize the partial expiration of the contract will

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The year-end adjustment to recognize the partial expiration of the contract for one month (December) out of the three months covered by the advance would involve recognizing one-third of the $14,400 as revenue. This amounts to $4,800 ($14,400 / 3). Recognizing revenue increases stockholders' equity by increasing retained earnings.

Jack's Snow Removal Company Received a Cash Advance of $14,400