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Calculating unearned revenue?
On April 30, 2005, XYZ Company received $16,800 cash from a customer as payment for services
To be performed over the next twelve months. Calculate the amount of unearned revenue that would appear in XYZ Company's balance sheet at December 31, 2005. |
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How much revenue is unearned on April 30? This amount is your beginning amount. Now you need to calculate the amount that was earned at the end of the year and the amount that is still unearned at the end of the year.
To calculate the amount earned you simply take the beginning account balance times number of months used during the year over 12 months. So: $16,800 * 8/12 = Earned Revenue. Also $16,800 minus the amount calculated above equals ending Unearned Revenue or your Unearned Revenue account balance on 31 Dec 2005. |
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