On September 1,Patterson Maintenance Company contracted to provide monthly maintenance services for the next five months at a rate of $2,700 per month.The client paid Patterson $13,500 on September 1.Assuming Patterson records deferred revenues using the alternative treatment,what would be the entry on September 1?
A) Debit Cash and credit Unearned Revenue for $13,500
B) No entry is needed until the services are performed
C) Debit Cash and credit Service Revenue for $13,500
D) Debit Prepaid Maintenance and credit Cash for $13,500

Question

Quizplus · Accepted Answer

Under the alternative treatment, revenue is recognized when cash is received. Therefore, the entry would be to debit Cash and credit Service Revenue for $13,500.

On September 1,Patterson Maintenance Company Contracted to Provide Monthly Maintenance