Question

On November 21st, Jerry's accounting firm collected $20,000 from John for work to be performed in the future. On December 10th, the accounting firm completed 60% of John's work. What is the journal entry made on December 10th?

A) Debit service revenue $12,000 and credit unearned revenue $12,000

B)Debit unearned revenue $20,000 and credit cash $20,000

C) Debit cash $20,000 and credit unearned revenue $20,000

D) Debit unearned revenue $12,000 and credit service revenue $12,000

Answer 1

The journal enrty made on December 10th is:

Option D) Debit unearned revenue $12,000 and credit service revenue $12,000

because unearned revenue is a liability for the recipient of the payment, so the initial entry was a debit to the cash account and a credit to the unearned revenue account. But now, on december 10th, 60 % of work is done, the unearned revenue account must be debited.

And the revenue account (Service Revenues) is credited, thus increasing its account balance because the service is performed.