Questions: A company receives 450 in February for services that will be performed in March. In March, the adjusting entry is recorded as: Multiple Choice Debit Service Revenue 450, Credit Deferred Revenue 450 Debit Deferred Revenue 450, Credit Service Revenue 450 Debit Cash 450, Credit Deferred Revenue 450 Debit Cash 450, Credit Service Revenue 450

The answer is the second one (B): Debit Deferred Revenue $450, Credit Service Revenue $450.

Explanation for each option:

1. Debit Service Revenue $450, Credit Deferred Revenue $450:

   • This entry is incorrect because it suggests that service revenue is being reduced (debited) and deferred revenue is being increased (credited). However, in March, the service has been performed, so we need to recognize the revenue, not reduce it.

2. Debit Deferred Revenue $450, Credit Service Revenue $450:

   • This entry is correct. Deferred revenue is a liability account that was credited when the cash was received in February. In March, when the service is performed, we need to recognize the revenue. Therefore, we debit (reduce) the deferred revenue account and credit (increase) the service revenue account.

3. Debit Cash $450, Credit Deferred Revenue $450:

   • This entry is incorrect because it suggests that cash is being received in March. However, the cash was already received in February, and the entry in March should recognize the revenue, not the receipt of cash.

4. Debit Cash $450, Credit Service Revenue $450:

   • This entry is incorrect because it suggests that cash is being received in March and directly credited to service revenue. However, the cash was received in February, and the correct entry in March should involve recognizing the revenue by adjusting the deferred revenue account.

Summary: In March, the correct adjusting entry to recognize the revenue for the services performed is to debit Deferred Revenue $450 and credit Service Revenue $450.