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30 November, 03:40

Technical Services is working on a six-month job for a client, starting on February 1. It will collect $30,000 from its customer when the job is finished but the revenue is earned evenly over the six months. On March 31, before adjusting entries are made, Techno's Accounts Receivable account had a debit balance of $6,000. After the March 31 monthly adjusting entry has been made, what will be the balance in Accounts Receivable?

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  1. 30 November, 05:26
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    Accounts receivable balance as at March 31 = $ 16,000

    Explanation:

    The adjusting entry for the earned revenue on the contract is calculated as follows:

    Total contract Value $ 30,000

    Period of contract 6 months

    Earned Revenue per month $ 5,000

    Period of earning 2 months

    Earning for the period February 1 to March 31 2 * $ 5,000 = $ 10,000

    The accounting entry would be

    Accounts Receivable $ 10,000

    Revenue $ 10,000

    so the receivable balance after adding $ 6,000 is $ 16,000
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