Case A:
In this case, $29,400 was credited to service revenue during the year. To make the necessary adjusting entry and determine the balance of deferred service revenue at year-end, we need to recognize the portion of the revenue that has not yet been earned.
Adjusting Entry:
At the end of the year, we need to recognize the portion of the revenue that has not been earned. Assuming the services are evenly performed over the 12-month period, the adjusting entry would be as follows:
Date Account Debit Credit
------------------------------------------------------------------------
Dec 31 Deferred Service Revenue $24,500
Service Revenue $24,500
Calculation:
$29,400 (initial credit) - $4,900 (earned portion of the revenue over the year) = $24,500 (balance in Deferred Service Revenue at year-end)
Case B:
In this case, $29,400 was credited to deferred service revenue during the year. The adjusting entry is not required in this case since the revenue was already recognized as deferred service revenue.
Balance of Deferred Service Revenue at Year-End:
Since the entire $29,400 was already credited to deferred service revenue, the balance at year-end would be equal to the initial credit of $29,400.
Therefore, in Case A, the balance of deferred service revenue at year-end would be $24,500, while in Case B, it would be $29,400.