Corrections Services Sells Service Plans for Commercial Computer Maintenance

question 55

Essay

Corrections Services sells service plans for commercial computer maintenance.The price for each plan is $1,350 per year,paid in advance.On October 1,2016,a service plan was sold to a new customer for cash,and the plan covers the period October 1,2016 to September 30,2017.Adjusting entries are made on December 31 of each year.Prepare the journal entry for September 30,2017.

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Definitions:

Perpetual Inventory System

A method of accounting for inventory that records the sale or purchase of inventory immediately through the use of computerized point-of-sale systems and enterprise asset management software.

Journal Entries

Transactions registered in a ledger that form the basis of all financial reporting and accounting.

Adjusting Entries

Journal entries made in accounting records at the end of an accounting period to update the accounts for accruals and deferrals.

Income Statement

A financial statement that shows a company's revenue and expenses over a specific period, resulting in net income or loss.