Pattie's Event Planning Service has just prepared the unadjusted trial balance, which shows the following balances: Late in this month, she began working with a new client, providing event planning services for an upcoming event. When the event is complete, in the following month, she will collect the full amount of $900 from her client. As of the end of this month, she has rendered one-third of the services covered by the contract. She makes accrual adjustments monthly. The final adjusted balance of Service revenues, as shown on the adjusted trial balance, should be a:

Question

Pattie's Event Planning Service has just prepared the unadjusted trial balance, which shows the following balances:  Late in this month, she began working with a new client, providing event planning services for an upcoming event. When the event is complete, in the following month, she will collect the full amount of $900 from her client. As of the end of this month, she has rendered one-third of the services covered by the contract. She makes accrual adjustments monthly. The final adjusted balance of Service revenues, as shown on the adjusted trial balance, should be a:

Quizplus · Accepted Answer

The unadjusted trial balance shows a balance of $3,600 for Service revenues. However, Pattie has only earned one-third of the $900 contract with her new client, which amounts to $300 ($900 x 1/3). Therefore, she must make an adjusting entry to decrease Service revenues by $300 and recognize an accrued revenue of $300 ($900 x 1/3) to properly reflect the revenue earned during the current period.

Adjusted Service revenue balance = Unadjusted balance - Adjustment 
= $3,600 - $300 
= $3,300

Therefore, the final adjusted balance of Service revenues should be a credit balance of $3,300.

Pattie's Event Planning Service Has Just Prepared the Unadjusted Trial