Q15SE - Horngren'S Financial And Managerial Accounting

Question

Ocean Breeze Associates accrued \(8,500 of Service Revenue at December 31. Ocean Breeze Associates received \)14,500 on January 15, including the accrued revenue recorded on December 31. Requirements 1. Record the adjusting entry to accrue Service Revenue. 2. Record the reversing entry. 3. Journalize the cash receipt.

Step-by-Step Solution

Answer

Journal entries are as follows:

Requirements	Accounts and Explanation	Debit	Credit
1	Accounts Receivable	$8,500
	Service Revenue		$8,500
	To record the accrued service revenue
2	Service Revenue	$8,500
	Accounts Receivable		$8,500
	To record reversing entry
3	Cash	$14,500
	Service Revenue		$14,500
	To record receipt of service revenue

Step 1: Explanation on Adjusting Entry

Adjusting entry will be recorded by debiting accounts receivable and crediting service revenue by $8,500, respectively.

Step 2: Explanation on Reversing Entry

Reversing entry will be recorded by debiting service revenue and crediting accounts receivable by $8,500, respectively. 

Step 3: Explanation on Cash Receipt Entry

Cash receipt will be recorded by debiting cash and crediting service revenue by $14,500, respectively.