A company performs 20 days of work on a 30-day contract before the end of the year.The total contract is valued at $6,000 and payment is not due until the contract is fully completed.The adjusting entry includes a $4,000 debit to unearned revenue.

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Since only 20 days of work have been completed on a 30-day contract, only 2/3rds of the contract has been earned. This means that 1/3rd of the contract, or $2,000, is still considered unearned revenue and should be deferred until the work is completed. Therefore, the adjusting entry should include a $4,000 debit to unearned revenue.

A Company Performs 20 Days of Work on a 30-Day