Exercise 3-10A (Algo) Prepaid vs. unearned: the entity concept LO 3-2, 3-3 On October 1, Year 1, Josh Smith, attorney, accepted an $34,000 cash advance from his client, James Company, for services to be performed over the next six months. Required a. Record the deferral and the related December 31, Year 1, adjustment for Josh Smith in an accounting equation. (Do not round intermediate calculations. Enter any decreases to account balances with a minus sign.) Event Cash collected Revenue earned JOSH SMITH ATTORNEY-YEAR 1 Assets Liabilities Stockholders' Equity Unearned Cash Revenue Common Stock Retained Earnings b. Record the deferral and the related December 31, Year 1, adjustment for James Company in an accounting equation. (Do not round intermediate calculations. Enter any decreases to account balances with a minus sign.) JAMES COMPANY-YEAR 1 Assets Event Cash Prepaid Legal Fees Cash paid Service used Liabilities Common Stock Stockholders' Equity Retained Earnings