Question

On August 1 of the current​ year, Trevor Beck received for legal services to be performed evenly throughout the next six months. The adjusting entry on December 31 of the current year would include​ a:

Answer 1

the question is missing the amount received by Trevor, but we can solve using a number that we choose:

For instance, lets say that Trevor received $6,000 for legal services to be performed during 6 months. The journal entry to record this would be:

August 1

Dr Cash 6,000

Cr Unearned revenue 6,000

On December 31, the adjustment entry should be:

Dr Unearned revenue 5,000

Cr Service revenue 5,000

Unearned revenue is a liability account because we received money but we owe the services, therefore, revenue will only be recognized as the legal services are performed.