On June 1,Year 1,Jack Associates collected $48,000 cash for consulting services to be provided for one year beginning immediately.Based on this information,which of the following shows how the required adjustment on December 31,Year 1,would affect Jack's ledger accounts?

Question

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Revenue earned per month = $48,000 total ÷ 12 months = $4,000 per month
As of December 31, Year 1:
Amount earned = $4,000 per month × 7 months = $28,000 service revenue
Recognizing deferred revenue is a claims exchange transaction. The liability account (unearned revenue) decreases. The revenue recognition increases net income which ultimately increases retained earnings.

On June 1,Year 1,Jack Associates Collected $48,000 Cash for Consulting