On May 1,2015.Bee Advertising Company received $2,500 from Julie Cee for advertising services to be completed by April 30,2016.Assume the receipt was recorded as unearned fees and that at December 31,2015,$1,000 of the fees had been earned.The adjusting entry prepared by Bee on December 31,2015,should include:
A) A debit to Unearned Fees for $500.
B) A credit to Unearned Fees for $500.
C) A credit to Earned Fees for $1,000.
D) A debit to Earned Fees for $1,000.
E) A debit to Earned Fees for $500.

Question

Quizplus · Accepted Answer

The adjusting entry should recognize the earned portion of the fees. Since $1,000 of the fees have been earned by December 31, 2015, a credit to Earned Fees for $1,000 is needed to reflect this revenue.