The accounting records of Patricia Event Planning Service include the following select unadjusted balances on December 31, 2014: Salaries Expense, $6,000; Service Revenue: $20,000; Unearned Revenue, $400; Supplies Expense, $600; Rent Expense, $300; Depreciation Expense-Equipment, $200. Later in December, she worked with a new client and provided event planning services for an upcoming event. When the event is complete in January, 2015, she will collect the full amount of $1,200 from her client. As of the end of December, 2015, she rendered one-third of the services covered by the contract. She made the accrual adjustments. The final adjusted balance of Service Revenue, as shown on the adjusted trial balance, should be a:
A)debit balance of 21,200.
B)credit balance of $20,000.
C)debit balance of $1,200.
D)credit balance of $20,400.

Question

Quizplus · Accepted Answer

The unadjusted balance of Service Revenue is $20,000. However, since Patricia rendered one-third of the services covered by the contract, the revenue recognized in December should only be $400 ($1,200 x 1/3). This amount should be added to the unadjusted balance to get the total service revenue earned for the period, which is $20,400 ($20,000 + $400). Therefore, the final adjusted balance of Service Revenue should be a credit balance of $20,400.

The Accounting Records of Patricia Event Planning Service Include the Following