Question

Dalton Delivery Service is hired on October 31, 2016 to perform services, beginning on November 1, 2016. The delivery services will be performed for six months at a rate of $2,000 per month. Dalton's fiscal year ends on December 31. What amount of service revenue should be recorded as an adjusting entry on December 31, 2016?

A. $2,000
B. $4,000
C. $6,000
D. $12,000
E. None of the above

Answer 1

For Dalton Delivery Service, the service revenue to be recorded as an adjusting entry on December 31, 2016, for two months of delivery services is $4,000.

Step-by-step explanation:

The student is asking about how to record service revenue for Dalton Delivery Service in their accounting books for the fiscal year ending on December 31, 2016. Dalton Delivery Service began providing services on November 1, 2016, and will continue for six months at $2,000 per month. From November 1 to December 31, there are two months of service provided, which means that the service revenue to be recorded on December 31, 2016, is for two months. Thus, the adjusting entry for service revenue should be 2 months × $2,000 per month = $4,000. Therefore, the correct answer to how much service revenue should be recorded as an adjusting entry on December 31, 2016, is B. $4,000.