Question

a. Tao Co. receives $10,000 cash in advance for four months of evenly planned legal services beginning on October 1. Tao records it by debiting Cash and crediting Unearned Revenue both for $10,000. It is now December 31, and Tao has provided legal services as planned. What adjusting entry should Tao make to account for the work performed from October 1 through December 31

Answer 1

Answer:

Dr unearned revenue $7,500

Cr legal services revenue               $7,500

Being recognition of legal services revenue earned

Explanation:

The appropriate adjusting entry now would be to recognize the revenue earned from October 1 through to December 31.

Revenue=$10,000*3/4=$7,500

The $7,500 would be debited to unearned revenue account as it is now earned while the legal services revenue account would be credited for the  same amount.