On September 1,Advantage Maintenance Company contracted to provide monthly maintenance services for the next ten months at a rate of $2,400 per month.The client paid Advantage $24,000 on September 1.The maintenance services began on that date.Assuming Advantage records deferred revenues using the alternative treatment,what would be the adjusting entry recorded on December 31?
A) No entry is needed since revenue was recorded on September 1.
B) Debit Service Revenue and credit Unearned Revenue for $14,400
C) Debit Service Revenue and credit Unearned Revenue for $24,000
D) Debit Unearned Revenue and credit Service Revenue for $9,600

Question

Quizplus · Accepted Answer

The adjusting entry on December 31 would be to debit Service Revenue and credit Unearned Revenue for $14,400. This is because Advantage has earned $14,400 of revenue for the four months of services provided from September 1 to December 31 ($2,400 per month x 4 months = $9,600). The remaining $9,600 of the $24,000 payment received on September 1 is still unearned and should be recorded as a liability.

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