UNEARNED REVENUE Irvine Pest Control signed a $2,100-per-month contract on November 1, 2009, to provide pest control services to rental units owned by Garden Grove Properties. Irvine received three months’ service fees in advance, on signing the contract.

Required:

. Prepare Irvine’s journal entry to record the $6,300 cash receipt.

. Prepare Irvine’s adjusting entry at December 31, 2009.

. How would the advance payment be reported in Irvine Pest Control’s December 31, 2009, balance sheet? How would the advance payment be reported in Garden Grove Properties’ December 31, 2009, balance sheet?

Exercise