Question

Jenning Co. adjusts its books each month but closes its books at the end of the year. The trial balance at July 31 before adjustments is as follows:

Debit
Cash $12,920
Accounts Receivable $9,620
Supplies $1,400
Prepaid Insurance $3,120
Equipment $26,000

Credit
Accumulated Depreciation—Equipment $10,400
Unearned Service Revenue $6,500
Capital Stock $7,190
Retained Earnings $23,500

Debit
Dividends $1,560

Credit
Service Revenue $16,510

Debit
Wages and Salaries Expense $7,800
Utilities Expense $380
Rent Expense $1,300

Total Debit: $64,100
Total Credit: $64,100

Refer to the trial balance for Jenning Co.

According to contracts, $4,810 of Unearned Service Revenue has been earned in July. Which of the following is the correct amount of Service Revenue to be reported in the July income statement?

a. $11,700
b. $16,510
c. $20,410
d. $21,320

Answer 1

The correct amount of Service Revenue to be reported in the July income statement is $21,320.

Step-by-step explanation:

To determine the correct amount of Service Revenue to be reported in the July income statement, we need to adjust the Unearned Service Revenue based on the contracts earned. According to the information provided, $4,810 of Unearned Service Revenue has been earned in July. Therefore, we need to reduce the Unearned Service Revenue by $4,810 and increase the Service Revenue by the same amount.

The original Service Revenue reported on the trial balance is $16,510. By adding the earned revenue of $4,810, the correct amount of Service Revenue to be reported in the July income statement is $21,320.