Use this information pertaining to Tucson Company to answer the following question. 1.The corporation's Supplies account showed a beginning debit balance of $400 and supplies purchased of $1,600.There were $600 of supplies on hand at year end.
2)Depreciation on a building is estimated to be $10,000.
3)A one-year insurance policy was purchased for $4,000.Six months have passed since the purchase.
4)Accrued interest on a note receivable amounted to $200.
5)The company received a $3,600 advance payment during the year on services to be performed.By the end of the year,one-third of the services had been performed.
The adjusting entry to record the amount of service revenue earned during the accounting period is

Question

Quizplus · Accepted Answer

To record the revenue earned for the services performed during the year, we need to use the accrual accounting principle of recognizing revenue when it is earned, not when it is received. According to the information provided, the company received an advance payment of $3,600 for the services to be performed, and one-third of the services had been performed by the end of the year. Therefore, the amount of revenue earned during the year is (1/3)*$3,600 = $1,200. The adjusting entry to record this revenue would be a credit to Unearned Revenue (liability account) for $1,200 and a debit to Service Revenue (income account) for $1,200. Choice B is the only option that includes these accounts in the adjusting entry.

Use This Information Pertaining to Tucson Company to Answer the Following