The end-of-the-year adjustment to reflect revenue earned would be recorded by debiting unearned revenue and crediting revenue for $7,500, representing five months of legal services provided.
The question pertains to the end-of-the-year adjustment for revenue recognition in accounting. When Benjamin and Associates collected $18,000 in advance for legal services, they recorded this as unearned revenue or deferred revenue, which is a liability on the balance sheet. As services are rendered over the year, this liability is reduced, and revenue is recognized proportionally.
By August 1, 2017, the firm would have rendered five months’ worth of services. The calculation provided $18,000/12*5months=$7,500, suggests revenue for five months has been earned. The journal entry will include a debit to the unearned/deferred revenue account and a credit to the revenue account for the amount of $7,500.