Meggie's Fitness center received $720 from a customer in advance for one year membership in the fitness center.The entry that would be made to record the fee receipt is:

Question

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When a customer pays in advance for a one-year membership, the cash received is considered a liability until the services are provided. Therefore, the best choice is to debit Cash and credit Unearned Revenue, as this accurately reflects the transaction and follows the accounting principle of revenue recognition. Option A is incorrect because it reverses the debit and credit accounts. Option C is incorrect because it prematurely recognizes revenue before the services are provided. Option D is incorrect because it does not recognize the liability created by the upfront payment.

Meggie's Fitness Center Received $720 from a Customer in Advance