Question

On the last day of December 2013, Tom’s Trucks entered into a transaction that resulted in a receipt of $108,000 cash in advance related to services that will be provided during January 2013. During December of 2013, the company also performed $64,000 of services which were neither billed nor paid. Prior to December adjustments and before these two transactions were recorded, the company’s trial balance showed service revenue of $582,735 at December 31, 2013. There are no other prepaid services yet to be delivered, and during the month all outstanding accounts receivable from prior months were collected.

If Tom’s Trucks makes the appropriate adjusting entry, how much will service revenue will be reflected on the December 31, 2013 income statement?

If Tom’s Trucks makes the appropriate adjusting entry, how much will be reported on the December 31, 2013 balance sheet as unearned revenue?

If Tom’s Trucks makes the appropriate adjusting entry, how much will be reported on the December 31, 2013 balance sheet as accounts receivable?

Answer 1

a. Service revenue on the December 31, 2013 income statement = $582,735 + $64,000

= $646735

Note:- Company also performed $64,000 of services which were neither billed nor paid,that means its adjusting entrywould be :

Accounts receivable	64000
To service revenue		64000

b. Amount reported on the December 31, 2013 balance sheet as unearned revenue = $108,000

Note:-  unearned revenue means revenue which has not been earned yet, but recorded in books of accounts

c. Amount reported on the December 31, 2013 balance sheet as accounts receivable = $64,000

Note:- Accounts receivable wii be shown in Balance sheet as revenue earned but not received in cash, company a performed $64,000 of services which were neither billed nor paid, adjusting entry would be :

Accounts receivable	64000
To service revenue		64000