On June 20,2013,Parker Services received $2,400 in advance from a customer for one month's service.The journal entry to adjust the accounts at the end of June would be which of the following?
A) Debit Service revenue $1,600 and credit Unearned service revenue $1,600.
B) Debit Unearned service revenue $800 and credit Service revenue $800.
C) Debit Unearned service revenue $2,400 and credit Service revenue $2,400.
D) Debit Service revenue $800 and credit Accounts receivable $800.

Question

Quizplus · Accepted Answer

Since the service was for one month and the payment was received in advance on June 20, by the end of June (10 days later), a portion of the service has been provided. The correct entry moves a portion of the unearned revenue to earned (service revenue). Given the total is for a month ($2,400) and only about one-third of the month has passed (10 days out of approximately 30), option B correctly adjusts for the portion of the service that has been provided by the end of June, which is $800 (1/3 of $2,400).

On June 20,2013,Parker Services Received $2,400 in Advance from a Customer