Prism marketing received $100,000 from a customer on january 2nd, 2022 to be on retainer for the next two years. the appropriate journal entry to illustrate earned revenue at prism's fiscal year-end on december 31st, 2022 would be in the choices below, as per convention, debits are listed first followed by credits.

Debit    Cash                              $100,000

Credit   Service Revenue             $50,000

Credit   Deferred revenue            $50,000

Being two years retainer-ship income

Explanation:

The two years retainer-ship $100,000 income received is of two parts $50,000 is for the current financial year  (year 2022) and the other $50,000 is income received in advance also called unearned or deferred income  which is for  year 2023.

The current year (year 2022) income is already earned and should form part of the income statement for the year and must be credited to service income account, while the portion received in advance should be credited to unearned revenue also called deferred revenue account. This is in line with accrual accounting principle, because it is money received for which services have not yet been rendered.

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