Duluth Co.collected a $6,000 cash advance from a customer on November 1,Year 1 for services to be provided over a six-month period beginning on that date.If the year-end adjustment is properly recorded,what will be the effect of the adjusting entry on Duluth's Year 1 financial statements?
A)Increase assets and decrease liabilities
B)Increase assets and increase revenues
C)Decrease liabilities and increase revenues
D)No effect

Question

Quizplus · Accepted Answer

The adjusting entry to recognize revenue earned on the contract will increase revenues and decrease liabilities (unearned revenue).

Duluth CoCollected a $6,000 Cash Advance from a Customer on November