On May 1, Sellers Marketing Company received $1,500 from Franco Marcelli for a marketing campaign effective from May 1 this year to April 30 of the following year. The Cash receipt was recorded as unearned fees and at year-end on December 31, $1,000 of the fees had been earned. Assuming adjustments are only made at year-end, the adjusting entry on December 31 would be:

Question

Quizplus · Accepted Answer

Since on December 31, only $1,000 of the fees had been earned, $500 is still unearned. Therefore, the adjusting entry would be a debit to Unearned Fees and a credit to Fees Earned for $1,000. This reduces the liability account of unearned fees, and increases the revenue recognized in the current period.

On May 1, Sellers Marketing Company Received $1,500 from Franco