Management Services Sells Service Plans for Commercial Computer Maintenance

question 211

Essay

Management Services sells service plans for commercial computer maintenance.The price for each plan is $1,350 per year,paid in advance.On October 1,2019,a service plan was sold to a new customer for cash,and the plan covers the period October 1,2019 to September 30,2020.Prepare the December 31,2019 adjusting entry.Round to two decimal places.Omit explanation.

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Definitions:

Historical Cost

The original cost at which an asset is acquired and recorded in the financial statements, not adjusted for inflation or market changes.

Replacement Cost

The cost to replace an asset of a company at the present time, according to its current worth.

Net Realizable Value

Net Realizable Value is the estimated selling price of goods minus the costs of their sale or completion, used to value inventory or accounts receivable in the context of impairments or realizable value considerations.

Normal Profit Margin

The average amount by which a company's sales exceed its cost of goods sold and operating expenses, representing a standard level of profit.