Question

(1) On August 1, 2018, We R Clean Company signed a 9-month contract with a hotel chain to provide pool and spa cleaning services for 3 hotel sites. The contract price of $14,850 was collected on the date the contract was signed. The services will be provided evenly over the next 9 months, starting on August 1. The adjusting entry on December 31, 2018 will

Credit Service Revenue for $6,600

Debit Earned Revenue for $6,600

Credit Service Revenue for 8,910

Debit Unearned Revenue for $8,250

(2) Collegiate Fitness Centers have 15,000 members whose monthly dues are $30 each. The company does not send individual bills to customers, who have until the 10th day of the month following the month of service to pay their monthly dues. On December 31, 2017, the company’s records show that 7,000 customers have already paid their December dues, and the payments were properly recorded. The adjusting entry to be recorded on December 31 will include

A credit to Membership Revenue of $450,000

A credit to Membership Revenue of $210,000

A debit to Accounts Receivable of $210,000

A debit to Accounts Receivable of $240,000 (3) The Supplies account has a balance of $1,000 on January 1. During January, the company purchased $25,000 of Supplies on account. A count of Supplies at the end of January indicates a balance of $3,000. Which one of the following is a correct amount to be reported on the company's financial statements for the month ending January 31? Supplies Expense - $23,000 Accounts Payable - $28,000 Supplies Expense - $26,000 (4) Under accrual basis accounting: net income is calculated by matching cash outflows against cash inflows the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles. events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received cash must be received before revenue is recognized. (5) Which of the following statements is true with respect to the percentage of credit sales method for estimating uncollectible accounts? This method is referred to as the Balance Sheet approach Bad Debts Expense is recorded at the time of an account actually becoming delinquent The amount recorded for bad debts expense does not depend on the pre-adjustment balance in the Allowance for Doubtful Accounts This method does not allow for future uncollectible accounts

Answer 1

Dear student, only one question is allowed at a time. I am answering the first question

When the amount is received in advance for services to be provided in future, following entry will be passed

August 1

Bank / Cash       $14,850

    Unearned Revenue    $14,850

(Being amount received in advance for services to be provided in future)

Expired period from August 1 to December 31

= 5 months

So, for these 5 months, revenue will be recognized as the service has already been provided

Amount to be recognized as revenue

= Total amount received x Expired Period / Total period

= $14,850 x 5 / 9

= $8,250

Journal entry

Unearned Revenue    $8,250

    Service Revenue        $8,250

(Being amount transferred from unearned revenue to revenue account)

So, as per above discussion, option D is the correct option