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Sutton Law PLLC collected advance payments of $10,000 from customers during the month of March for future legal services. These advance payments were recorded in unearned revenue. During April, the firm performed $3,500 of legal services related to these advance payments. What is the correct adjusting journal entry at the end of April?

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To adjust for the legal services that were performed during April related to the advance payments received in March, Sutton Law PLLC needs to recognize the earned revenue.

The adjusting journal entry at the end of April would involve debiting the Unearned Revenue account (to decrease the liability) and crediting the Revenue account (to recognize the income earned).

Here is the correct adjusting journal entry:

Adjusting Journal Entry:

  • Debit: Unearned Revenue $3,500
  • Credit: Revenue $3,500

This entry decreases the liability for unearned revenue and recognizes the revenue earned from the services performed. After this entry, the remaining unearned revenue would be $6,500 ($10,000 - $3,500).