Northlake Nordic Centre Inc. holds 54,000 of unearned revenue from season passes (30,000 sold in November, $24,000 in December), all covering the four months from 1 December to 31 March. Record the adjusting entry at 31 December.

Answer

Dr Unearned Revenue 13500; Cr Service Revenue 13500

Accounts - Unearned Revenue - Service Revenue - Cash - Accounts Receivable One month of four has been delivered: 54,000 × 1/4 = **13,500**. Debit **Unearned Revenue** — the liability is reduced — and credit **Service Revenue** for the month earned. The trap is the direction: debiting Service Revenue and crediting Unearned Revenue would cut revenue and raise the debt. Cash moved when the passes were sold; Accounts Receivable would mean customers owe Northlake, the reverse of the facts.

Hermanson Vol 1 ch 3 (unearned revenues; the alternative treatment); Dauderis & Annand §3.2 (concept map D7, D12)