Q17SE_1 - Horngren'S Financial And Managerial Accounting

Question

On September 1, 2018, Salem Landscaping collected $24,000 in advance from customers for landscaping services. The service revenue will be earned monthly over the 12-month period ending August 31, 2019. Requirements 1. Journalize the entry on September 1 by using the alternative treatment of deferred revenues. 2. Record the December 31, 2018 adjusting entry

Step-by-Step Solution

Answer

Date	Account and Explanation	Debit	Credit
01-09-2018	Cash	$24,000
	Service Revenue		$24,000
	To record amount collected from customer

Step-by-Step Solution Step 1: Explanation of Unearned Revenue

Unearned revenue refers to revenue received in advance from the customers, in which goods or services will be provided later.

Step 2: Explanation of Entry

On September 1, 2018, the advance receipt will be recorded by debiting cash and crediting service revenue by $24,000, respectively, to record receipt of deferred revenue as an alternative treatment.