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Suppose a customer rents a vehicle for three months from Commodores Rental on November 1, paying $3,750 ($1,250/month). Record the necessary entries in the Journal Entry Worksheet. Calculate the year-end adjusted balances of the Deferred Revenue and Service Revenue accounts (assuming the balance of Deferred Revenue at the beginning of the year is $0).

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Answer:

Deferred Revenue $1,250

Explanation:

Journal entry Dec 31:

Dr. Deferred Revenue $2,500

Cr. Service Revenue $2,500

To record adjusting entry for the rental service incurred from Nov 1 to Dec 31

Adjusted balances Dec 31:

In the Balance sheet,

Deferred Revenue $1,250

In the income statement,

Service Revenue $2,500 plus all other services revenue for the year

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