1. 5 Start Cleaning Service received advance payments from customers during 2016
ID: 2542904 • Letter: 1
Question
1. 5 Start Cleaning Service received advance payments from customers during 2016 of $68,500. By December 31, 2016, $14,700 worth of services had not been completed. After the adjustments are recorded and posted at December 31, 2016, the balances in unearned revenue and revenue accounts will be:
Unearned Revenue Service Revenue
a. $14,700 $68,500
b. $14,700 $53,800
c. $0 $68,500
d. $68,500 $14,700
Explanation / Answer
Solution :
Unearned Revenue is the amount of revenue which has not been completed or rendered however a payment for the same has been received in advance.
Service Revenue is the amount of revenue that thas been completed during the financial year.
In the given question, an adance of $ 68,500 has been recieved. Out of whihc $14,700 worth of services are yet to be completed. Hence, the amount of unearned revenuw would be $14,700. The balance amount of $53,800 would be recognised as revenu for the period as the services are completed during the financial period.
The correct answer is option b : Unearned revenue 14,700 and service revenue of 53,800
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