Question

July 31: during july, ps music provided guest disc jockeys for kxmd for a total of 115 hours. the contract requires ps music to provide a guest disc jockey for 80 hours per month for a monthly fee of $3,600, which ps music has already received payment for. any additional hours beyond 80 will be billed to kxmd at $40 per hour.

Answer 1

The journal entries to record service revenue during July should be:

Dr Cash 3,600

Cr Service revenue (80 hours per month) 3,600

Dr Accounts receivable [(115 - 80 hours) x $40] 1,400

Cr Service revenue 1,400

Since the company has collected only the regular hours provided according to the contract, the remaining hours should be recorded as accounts receivable.