On April 1,Garcia Publishing Company received $1,548 from Otisco,Inc.for 36-month subscriptions to several different magazines.The company credited Unearned Fees for the amount received and the subscriptions started immediately.Assuming adjustments are only made at year-end,What is the adjusting entry that should be recorded by Garcia Publishing Company on December 31 of the second year?
A)debit Unearned Fees,$1,548; credit Fees Earned,$1,548.
B)debit Unearned Fees,$516; credit Fees Earned,$516.
C)debit Unearned Fees,$1,161; credit Fees Earned,$1,161.
D)debit Unearned Fees,$129; credit Fees Earned,$129.
E)debit Unearned Fees,$387; credit Fees Earned,$387.

Question

Quizplus · Accepted Answer

The total amount received for the 36-month subscriptions is $1,548. To find the monthly subscription fee, divide $1,548 by 36 months, which equals $43 per month. By December 31 of the second year, 24 months have passed (12 months in the first year and 12 months in the second year). Therefore, the amount earned in 24 months is 24 months * $43/month = $1,032. The initial unearned fee was $1,548, so the remaining unearned fee is $1,548 - $1,032 = $516. The adjusting entry should move $516 from Unearned Fees to Fees Earned to reflect the revenue earned in the 24 months.

On April 1,Garcia Publishing Company Received $1,548 from Otisco,Inc