Adjusting entries for unearned fees The balance in the unearned fees account, before adjustment at the end of the year, is $18,000. Journalize the adjusting entry required if the amount of unearned fees at the end of the year is $3,600.

Q: Expert Answer

To determine Unearned Revenue Unearned revenue is the revenue which is earned in advance, ahead of providing goods and services. As per the revenue recognition principle it is not recorded in the books of accounts. This is a liability for the business. Adjusting Entries Adjusting entries indicates those entries, which are passed in the books of accounts at the end of one accounting period. These entries are passed in the books of accounts as per the revenue recognition principle and the expenses recognition principle to adjust the revenue, and the expenses of a business in the period of their occurrence. Rule of Debit and Credit: Debit - Increase in all assets, expenses & dividends, and decrease in all liabilities and stockholders’ equity. Credit - Increase in all liabilities and stockholders’ equity, and decrease in all assets & expenses. To record: The adjusting entry for the unearned fees. Explanation Unearned revenue is a liability, and it is decreased by $14,400. So debit unearned fees by $14,400. Service revenue is component of stockholders’ equity and it increased it. So credit fees earned by $14,400. Working Note: Calculation of fees earned for the accounting period ( Fees earned for the accounting period ) = (

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Financial & Managerial Accounting

14th Edition

Carl Warren + 2 others

Publisher: Cengage Learning

ISBN: 9781337119207

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BuyFind

Financial & Managerial Accounting

14th Edition

Carl Warren + 2 others

Publisher: Cengage Learning

ISBN: 9781337119207

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Answer 3

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To determine

Unearned Revenue

Unearned revenue is the revenue which is earned in advance, ahead of providing goods and services. As per the revenue recognition principle it is not recorded in the books of accounts. This is a liability for the business.

Adjusting Entries

Adjusting entries indicates those entries, which are passed in the books of accounts at the end of one accounting period. These entries are passed in the books of accounts as per the revenue recognition principle and the expenses recognition principle to adjust the revenue, and the expenses of a business in the period of their occurrence.

Rule of Debit and Credit:

Debit - Increase in all assets, expenses & dividends, and decrease in all liabilities and stockholders’ equity.

Credit - Increase in all liabilities and stockholders’ equity, and decrease in all assets & expenses.

To record: The adjusting entry for the unearned fees.

Explanation of Solution

Unearned revenue is a liability, and it is decreased by $14,400. So debit unearned fees by $14,400.
Service revenue is component of stockholders’ equity and it increased it. So credit fees earned by $14,400.

Working Note:

Calculation of fees earned for the accounting period

(Fees earned for the accounting period) = (

Adjusting entries for unearned fees The balance in the unearned fees account, before adjustment at the end of the year, is $18,000. Journalize the adjusting entry required if the amount of unearned fees at the end of the year is $3,600.

Financial & Managerial Accounting

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Financial & Managerial Accounting

Adjusting entries for unearned fees

The balance in the unearned fees account, before adjustment at the end of the year, is $18,000. Journalize the adjusting entry required if the amount of unearned fees at the end of the year is $3,600.

Explanation of Solution

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