On December 1,Simpson Marketing Company received $3,600 from a customer for a marketing plan to be completed January 31 of the following year.The cash receipt was recorded as unearned fees.The adjusting entry for the year ended December 31 would include:
A)a debit to Earned Fees for $3,600.
B)a debit to Unearned Fees for $1,800.
C)a credit to Unearned Fees for $1,800.
D)a debit to Earned Fees for $1,800.
E)a credit Earned Fees for $3,600.

Question

Quizplus · Accepted Answer

The adjusting entry would recognize the portion of the unearned fees that have been earned by December 31. Since the service is to be completed over two months, half of the $3,600, which is $1,800, would be recognized as earned. Therefore, Unearned Fees would be debited by $1,800 to reduce the liability, and Earned Fees would be credited by $1,800 to recognize the revenue.

On December 1,Simpson Marketing Company Received $3,600 from a Customer