Accounting for Services Provided by Disco World

Explanation:

Disco World's Accounting Entries:

On November 1:

Dr Cash ($375*12) $4500

Cr Unearned service revenue $4500

On December 31:

Dr Unearned service revenue 4500*(2/3) $3000

Cr Service revenue $3000

Explanation:

On November 1, Disco World received fees in advance for dance lessons from twelve students, which was recorded as unearned service revenue as the service had not been provided yet.

On December 31, Disco World recognized the revenue earned for the services provided from November 1 to December 31. The revenue earned for this period was calculated as 2/3 of the total fees received, which amounts to $3,000.

Therefore, Disco World needed to debit the Unearned Revenue account and credit the Dance Lessons Revenue account for $3,000 to properly account for the services provided.