[branjo24]

The TJ Company collects all service revenue in advance. The company showed a $12,500 liability on its December 31, 2011 balance sheet for unearned service. During 2012, customers paid $50,000 for future services, and the income statement for the year ended December 31, 2012 reported service revenue of $52,700.

What amount for the liability unearned service revenue will appear on the balance sheet at December 31, 2012? Can you please explain to me how to reach the correct answer?

[pready]

Since the customers pay for all services in advance you need to add the $50,000 from the customers to the liability acount.

Now to calculate the ending liability amount you need to take the number calculated above and subract the service revenue.

[branjo24]

Thank you very much! This makes sense to me now, I was making it a lot harder than I should have.

[pready]

I also had the same problem when I first started studying accounting, so I totally understand .