Question

Julie Lambert has a large catering company. On May 1, a new client paid a 25% deposit of S1000 in advance of an event. The remaining balance of $3,000 was paid on June 15, when the event was catered. Which journal entry should Lambert record on June 15? 03 Multiple Choice A. Debit Cash $3,000 debit Unearned Catering Revenue $1.000; credit Catering Revenue Earned $4,000 B. Debit Cash $3.000; credit Unearned Catering Revenue $3.000 C. No entry is required when the event is catered D. Debit Prepaid Catering Revenue $4,000, credit Catering Revenue Earned $4,000

Answer 1

A. Debit Cash $3,000 debit Unearned Catering Revenue $1.000; credit Catering Revenue Earned $4,000

Step-by-step explanation:

The journal entry is shown below:

Cash A/c Dr $3,000

Unearned catering revenue A/c Dr $1,000

To Catering revenue earned A/c $4,000

(Being unearned revenue is recorded)

Since advance payment of $1,000 is made which is 25% of the deposit amount. So, the deposit amount would be

= $1,000 × 100 ÷ 25

= $4,000

And, the remaining balance i.e $3,000 was paid in cash so we debited the cash account with this amount