Question

The proper adjusting entry to record income earned on a contract for which the customer has...

The proper adjusting entry to record income earned on a contract for which the customer has previously prepaid in full is:

a.Unearned/deferred revenue xx

Cash xx

b.Cash xx

Unearned/deferred revenue xx

c.Revenue xx

Unearned/deferred revenue xx

d.Unearned/deferred revenue xx

Revenue xx

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Answer #1

Solution :

The Answer is (d)

Unearned/deferred revenue xxx
Revenue xxx

Explanation :

(a) at the time of payment the company passes the following entry :

Cash xxx
Revenue (for booking the part of work completed) xxx
Unearned Revenue (for booking the part of work yet to be completed) xxx

(b) Now after completing the contract the company will book the revnue for balance part :

Unearned Revenue xxx
Revenue xxx

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