On July 1, 2019, Major Co. pays $15,120 to Mesa Insurance Co. for a 4 - year insurance contract. Both companies have fiscal years ending December 31 Journalize and post the entry on July 1 and the adjusting entry on December 31 for Mesa Insurance Co. Mesa uses the accounts Unearned Service Revenue and Service Revenue. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. Round answers to O decimal places, e. g. 5,275.) Date Account Titles and Explanation Debit Credit Unearned Service Revenue Service Revenue

Debit Cash account $15,120

Credit Unearned Service Revenue $15,120

Being entries to record cash collected for service to be rendered.

Debit Unearned Service revenue $1,890

Credit Service Revenue $1,890

Being entries to recognize revenue earned as at 31 December

Explanation:

When an amount is collected in advance for a service yet to be rendered, the company recognizes and asset in form of cash and a liability in form of Unearned Service Revenue.

When the service for which cash was collected is performed, revenue is said to have been earned. Entries required then are debit Unearned Service Revenue Credit Service revenue.

For Mesa, on 1 July, entries required are

Debit Cash account $15,120

Credit Unearned Service Revenue $15,120

Being entries to record cash collected for service to be rendered.

As at 31 December, revenue earned

= 1/2 * $15120/4

= $1890

Entries required

Debit Unearned Service revenue $1,890

Credit Service Revenue $1,890

Being entries to recognize revenue earned as at 31 December