Adjusting entry for Service Revenue earned:
It is given that Tao co. Receives $10,000 cash in advance for 4 months of legal services on October 1, 2015, and records it by debiting cash and crediting unearned revenue both for $10,000.
It is now December 31, 2015, and Tao has provided legal services as planned. So the company needs to record the Revenue Earned for the period (Oct 1 to Dec. 31) that is 3 months = 10,000*3/4 = $7,500
The adjusting entry to account for the work performed from October 1 through December 31, 2015 shall be as follows:
Unearned Revenue Debit $7,500
Revenue Credit $7,500
(Being adjustment made for the Revenue earned)
