January 1, 2012, Office Manor's Unearned revenue account had a balance of $3,800. During the year, the company received $22,300 for services to be performed in the future. After adjusting entries were made, the balance in Unearned revenue on December 31, 2012 was $2,900.
Accounts receivable at the beginning of the year was $3,200. Billings for services performed on account were $31,200 during the year. After adjusting entries were made, the balance in Accounts receivable on December 31, 2012 was $1,000. No services were performed with immediate cash collection. What is the total Service revenue?
A) $56,600
B) $54,400
C) $55,700
D) $53,500

Question

Quizplus · Accepted Answer

The total Service revenue can be calculated by adding the change in Unearned revenue to the cash received for future services, and the change in Accounts receivable to the billings for services performed on account. For Unearned revenue, the company started with $3,800, received $22,300, and ended with $2,900. The change (reduction) in Unearned revenue, which represents revenue recognized during the year, is $3,800 - $2,900 = $900. For Accounts receivable, the company started with $3,200, billed $31,200, and ended with $1,000. The change (reduction) in Accounts receivable, which represents cash collected, is $3,200 - $1,000 = $2,200. However, since no services were performed with immediate cash collection, the entire amount billed ($31,200) represents revenue recognized. Therefore, the total Service revenue is the sum of the change in Unearned revenue ($900), the cash received for future services ($22,300), and the billings for services performed on account ($31,200): $900 + $22,300 + $31,200 = $54,400.

January 1, 2012, Office Manor's Unearned Revenue Account Had a Balance