On March 31, Phoenix, Inc. paid Melanie Publishing Company $15,480 for a 3-year subscription for five different magazines. The subscriptions started immediately. What is the adjusting entry that should be recorded by Melanie Publishing Company on December 31 of the first year if the credit to record the collection was made to Unearned Fees?

Question

Quizplus · Accepted Answer

The subscription is for 3 years, so the annual amount is $15,480 / 3 = $5,160. By December 31 of the first year, 9 months have passed, so the earned amount is ($5,160 / 12) * 9 = $3,870.