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Olney Cleaning Company had the following items that require adjustment at year end.

1. For one cleaning contract, $11,100 cash was received in advance. The cash was credited to Unearned Service Revenue upon receipt. At year end, $260 of the service revenue was still unearned.
2. For another cleaning contract, $8,700 cash was received in advance and credited to Unearned Service Revenue upon receipt. At year end, $3,000 of the services had been provided.

Required:

1. Prepare the adjusting journal entries needed at December 31. If an amount box does not require an entry, leave it blank.

Dec. 31		fill in the blank 02e1a8f7d03afe9_2	fill in the blank 02e1a8f7d03afe9_3
		fill in the blank 02e1a8f7d03afe9_5	fill in the blank 02e1a8f7d03afe9_6
Dec. 31		fill in the blank 02e1a8f7d03afe9_8	fill in the blank 02e1a8f7d03afe9_9
		fill in the blank 02e1a8f7d03afe9_11	fill in the blank 02e1a8f7d03afe9_12

2. What is the effect on the financial statements if these adjusting entries are not made?

In both of these cases, a liability (unearned service revenue) was originally created when cash was prior to the performance obligation being satisfied (prior to the revenue being earned). The adjusting entries the previously created liability by the amount of revenue earned during the period. If these adjusting entries were not made, revenue would be and liabilities (unearned revenue) would be . In addition, the of revenue would result in an of net income. Finally, because revenue is then closed to Retained Earnings, stockholders equity will also be .

3. What is the balance in Unearned Service Revenue at December 31 related to the two cleaning contracts? $fill in the blank e2c0c400aff506a_1

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