Question

Jennifer’s Dress Boutique custom makes wedding gowns, and requires customers to pay in advance for the work performed. When a customer pays $6,000 for a gown to be received at a future date, the company will A : Increase Cash $6,000 and increase Unearned Service Revenue $6,000 B : Increase Cash $6,000 and decrease Unearned Service Revenue $6,000 C : Decrease Cash $6,000 and decrease Unearned Service Revenue $6,000 D : Decrease Cash $6,000 and increase Service Revenue $6,000

Answer 1

A: Increase Cash $6,000 and increase Unearned Service Revenue $6,000

Step-by-step explanation:

As the customer is performing the payment in advance, it will generate an obligation to the business to do the wedding gowns. This will not be a revenue; it will be liability for the business until the job is done. While the job is incomplete and undelivered, it will represent unearned service revenue.