Question

Conrad Dry Cleaners cleans clothing on June 30, but customers do not claim and pay for their clothes until the first week of July. The journal entries for June and July would be:

a. June 30: Debit Cash $XXX; Credit Service Revenue $XXX
July 1: No entry needed

b. June 30: Debit Unearned Revenue $XXX; Credit Service Revenue $XXX
July 1: Debit Cash $XXX; Credit Unearned Revenue $XXX

c. June 30: Debit Accounts Receivable $XXX; Credit Service Revenue $XXX
July 1: Debit Cash $XXX; Credit Accounts Receivable $XXX

d. June 30: Debit Service Revenue $XXX; Credit Cash $XXX
July 1: No entry needed

Answer 1

The correct journal entries are: June 30, debit Accounts Receivable and credit Service Revenue; July 1, debit Cash and credit Accounts Receivable. This accounting treatment ensures revenue is recognized when earned and cash is recorded when received.

Step-by-step explanation:

The correct journal entries for Conrad Cleaners for the services performed on June 30th, but paid for in July, reflect the recognition of revenue in the period when the service was performed and the receipt of cash when the payment is actually made. Since the customers did not claim and pay for their cleaning until the first week of July, the revenue cannot be recognized as earned in June. Therefore, the correct entry on June 30th would be debiting Accounts Receivable to record the claim the business has against the customers for services provided, and crediting Service Revenue to recognize the revenue earned. The entry in July, when the cash is received, would involve a debit to Cash and a credit to Accounts Receivable.

Entries

June 30: Debit Accounts Receivable $XXX; Credit Service Revenue $XXX

• July 1: Debit Cash $XXX; Credit Accounts Receivable $XXX