Question: Understanding the alternative treatment of unearned revenues At the beginning of the year, Dapper Advertising owed customers $2,400 for unearned revenue collected in advance. During the year, Dapper received advance cash receipts of $7,500 and earned $15,000 of service revenue (exclusive of any amount earned from advance payments). At year-end, the liability for unearned revenue is $2,600 and unadjusted service revenue is $15,000. Requirements
1. Record the adjusting entry assuming that Dapper records the cash receipt of unearned revenue by initially crediting a liability account. Post the adjusting entry to the Unearned Revenue and Service Revenue T-accounts. Make sure to include the beginning balance and additional unearned revenue in the Unearned Revenue T-account.
2. Record the adjusting entry assuming that Dapper records the cash receipt of unearned revenue by initially crediting a revenue account. Post the adjusting entry to the Unearned Revenue and Service Revenue T-accounts. Make sure to include the beginning balance in the Unearned Revenue T-account and the additional unearned revenue in the Service Revenue T-account.
3. Compare the ending balances of the T-accounts under both approaches. Are they the same?