X Company prepares monthly financial statements. On January 1, a customer paid X

Question

X Company prepares monthly financial statements. On January 1, a customer paid X Company $29,400 in advance for cleaning services to be performed during the following three months, once in January, once in February, and once in March. What will be the result of the January 31 adjusting entry on X Company's financial statements?

Options:
a $9,800 increase in the Deferred Revenue account on the Balance Sheet
a balance of $9,800 in the Deferred Revenue account on the Balance Sheet
revenue of $9,800 reported on the Income Statement
a $9,800 decrease in the Retained Earnings account on the Balance Sheet
a $9,800 increase in the Cash account on the Balance Sheet
a $9,800 decrease in the Cash account on the Balance Sheet

Explanation / Answer

all the above options are incorrect. The revenue per month is $9800 hence adjusting entry would increase deferred revenue by $19600 and decrease income by same amount

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