Question

Jack's Snow Removal Company received a cash advance of exist6,000 on December 1, 2016 to provide services during the months of December, January, and February. The 2016 year- end adjustment to recognize the partial expiration of the contract will increase assets by exist2,000 decrease in liability by exist2,000 increase liabilities by exist2,000 increase assets by exist2,000 and increase equity by exist2,000 Using the same facts as question 4, Revenue will: Increase, B Decrease. C, Stay the same. D, increase by the same amount that liabilities will increase. Which of the following is increased with a debit?

Answer 1

• liabilities will decrease by $2,000
• revenue will increase by $2,000
• assets will remain the same

Step-by-step explanation:

The journal entry that records this transaction is:

Dr Unearned revenue 2,000

Cr Sales revenue 2,000

Unearned revenue is a liability account with a debit balance and since it decreases, it must be debited. Sales revenue is an equity that also has a debit balance. In this transaction no assets were affected.

Answer 2

will increase assets by exist2,000 decrease in liability by exist2,000

Revenue will: Increase

Step-by-step explanation:

will increase assets by exist2,000 decrease in liability by exist2,000

For example if we have an unearned revenue of $ 6000 and we provide services of $ 2000 then the liability will decrease by $ 2000 and income will be charged and hence increased. Unearned income is a liability and not an income . When it is earned the liability is decreased and income is increased

Revenue will: Increase,

Cash is increased with a debit