Question

Caswell Contracting Company records $4,000 of unearned service revenue being earned and the collection of $3,000 cash for service revenue previously accrued. The impact of these two entries on total service revenue is:

Answer 1

The total service revenue in the given scenario increases by $4,000, which is the amount of unearned service revenue that has been recognized as earned.

Step-by-step explanation:

The question is asking about the impact of two separate transactions on total service revenue.

• The first transaction involves recognizing $4,000 of unearned service revenue as earned.
• The second transaction is the collection of $3,000 cash for service revenue that had been previously accrued.

In the first transaction, the initially unearned revenue is now recognized as earned, thus increasing the total service revenue by $4,000.

However, the collection of $3,000 does not impact the total service revenue, as this was already recognized in revenues when it was accrued.

Therefore, only the $4,000 will increase the total service revenue.