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Which journal entry reflects the adjusting entry needed on December 31?:In November, BOC received a $5,000 cash deposit from a customer for custom-build goods that will be delivered in January (BOC recorded an entry for this $5,000 in November). Now, it is December 31, the end of the fiscal year.1 pointDr.   Advances from Customers   5,000   Cr.  Revenue                                        5,000No entry needed.Dr.   Cash       5,000   Cr.  Revenue               5,000Dr.   Unearned Revenue       5,000   Cr.  Inventory                                    5,000Dr.   Unearned Revenue       5,000   Cr.  Revenue                                    5,000

Question

Which journal entry reflects the adjusting entry needed on December 31?:In November, BOC received a 5,000cashdepositfromacustomerforcustom−buildgoodsthatwillbedeliveredinJanuary(BOCrecordedanentryforthis5,000 cash deposit from a customer for custom-build goods that will be delivered in January (BOC recorded an entry for this 5,000 in November). Now, it is December 31, the end of the fiscal year.1 pointDr.   Advances from Customers   5,000   Cr.  Revenue                                        5,000No entry needed.Dr.   Cash       5,000   Cr.  Revenue               5,000Dr.   Unearned Revenue       5,000   Cr.  Inventory                                    5,000Dr.   Unearned Revenue       5,000   Cr.  Revenue                                    5,000

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Solution

The correct journal entry that reflects the adjusting entry needed on December 31 would be:

Dr. Unearned Revenue 5,000 Cr. Revenue 5,000

Here's why:

  1. When BOC received the $5,000 cash deposit from a customer in November, it was recorded as a liability (Unearned Revenue) because the goods were not yet delivered. The company owes the delivery of goods to the customer.

  2. On December 31, the end of the fiscal year, no goods have been delivered yet. Therefore, the revenue is still unearned.

  3. The adjusting entry is needed to reflect that the revenue is still unearned at the end of the fiscal year. So, there is no change in the Unearned Revenue account and no revenue is recognized yet.

  4. Therefore, the correct adjusting entry is to debit (decrease) Unearned Revenue and credit (increase) Revenue. However, since the goods are not yet delivered, the Revenue account should not be increased.

  5. So, the correct entry is to debit Unearned Revenue and leave the credit side blank. This entry shows that the company still has the liability (Unearned Revenue) of $5,000 at the end of the fiscal year.

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Similar Questions

Which journal entry reflects the adjusting entry needed on December 31?:Last year, BOC purchased software for $10,000. The expected life of the software is 2 years and it has no expected salvage value. Now, it is December 31, the end of the fiscal year. No other entries were recorded for this software during the year.1 pointDr.  Software Amortization Expense     5,000     Cr.  Software                                                    5,000Dr.  Software Amortization Expense     5,000     Cr.  Software Revenue                            5,000No entry needed. Dr.  Software Amortization Expense     5,000     Cr.  Cash                                                    5,000Dr. Software Amortization Expense 5,000 Cr. PP&E 5,000

Which journal entry reflects the adjusting entry needed on December 31?:In November, BOC prepaid $30,000 of rent for December, January, and February (and it was recorded properly). Now, it is December 31, the end of the fiscal year. 1 pointDr.  Rent Expense        30,000   Cr.  Prepaid Rent                   30,000Dr.  Rent Expense        10,000   Cr.  Prepaid Rent                   10,000Dr.  Rent Expense        30,000   Cr.  Cash                         30,000Dr.  Rent Expense        10,000   Cr.  Cash                         10,000No entry needed.

Which journal entry(s) reflects the following transaction?:BOC received $10,000 of cash from a customer who took delivery of goods that originally cost BOC $8,000 to acquire.1 pointDr.   Cash          10,000    Cr.  Inventory         10,000Dr. Cash                       10,000    Cr.  Revenue                    10,000Dr.  Cost of Goods Sold   8,000   Cr.  Inventory                     8,000 Dr.   Cash   10,000    Cr.  Inventory      8,000    Cr.  Revenue       2,000Dr. Cash                       10,000    Cr.  Revenue                    10,000Dr.  Accounts Payable   8,000   Cr.  Inventory                     8,000 Dr.   Cash          10,000    Cr.  Revenue         10,000

Ref-2: On 1St October, 2022, a rent payment of $360,000 was made for two years in advance with respect to the company's warehouse premises, and debited in full to 'Prepaid Rent'. The rental tenancy began on 1st October, 2022. What is the required adjusting journal entry for the 2023 financial year end?

LO 5.1 If a journal entry includes a debit or credit to the Cash account, it is most likely which of the following?Choose one answer from the options below.A. a closing entryB. an adjusting entryC. an ordinary transaction entryD. outside of the accounting cycle

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