Question

In: Accounting

Kay Company receives a cash payment of $4,000 on November 12 for services it will perform...

Kay Company receives a cash payment of $4,000 on November 12 for services it will perform in December. Assume that December 31 is Kay Company’s fiscal year end. What adjusting journal entry should Kay record at December 31 related to the payment received in November?

Question 3 options:

Debit Service Revenue for $4,000, Credit Unearned Service Revenue for $4,000.

Debit Service Revenue for $4,000, Credit Cash for $4,000.

Debit Cash for $4,000, Credit Service Revenue for $4,000.

Debit Unearned Service Revenue for $4,000, Credit Service Revenue for $4,000.

Question 4 (1 point)

The employees of Kay Company work during the last week of the December and earn $5,000 of wages. Kay Company’s regular payroll cycle will pay the paychecks for the December work in January. According to the expense recognition principle (accrual accounting), when will Kay Company recognize the expense from the employees’ labor?

Question 4 options:

None of these answers.

February.

January.

December.

Solutions

Expert Solution

Answer to Question 3 : is Debit Unearned Service Revenue for $4,000, Credit Service Revenue for $4,000 (Option 4).

Reason : Kay Company when will receive the cash in November 20 would Debit Cash for $ 4,000 and Credit Unearned Service Revenue for $4,000, as service are due to be performed in December. In the month of December once the service performed Kay Company will recognise revenue by Debit Unearned Service Revenue for $4,000, Credit Service Revenue for $4,000. Accrual concept is the most fundamental principle of accounting which requires recording revenues when they are earned and not when they are received in cash.

Answer to Question 4 is December.

Reason : Accrual concept is the most fundamental principle of accounting which requires recording revenues when they are earned and not when they are received in cash , and recording expenses when they are incurred and not when they are paid.

Kay Company has incurred the expense in December and shall record in December irrespective of when it is paid.

ekkarill92 answered 1 month ago
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