Duluth Co. collected a $6,000 cash advance from a customer on November 1, 2016 for work to be performed over a six-month period beginning on that date. If the year-end adjustment is properly recorded, what will be the effect of the adjusting entry on Duluth’s 2016 financial statements?
A. Increase assets and decrease liabilities
B. Increase assets and increase revenues
C.Decrease liabilities and increase revenues
D. No effect
Answer:C
Duluth Co. collected a $6,000 cash advance from a customer on November 1, 2016 for work to be performed over a six-month period beginning on that date. If the year-end adjustment is properly recorded, what will be the effect of the adjusting entry on Duluth’s 2016 financial statements?
A. Increase assets and decrease liabilities B. Increase assets and increase revenues C.Decrease liabilities and increase revenues D. No effect