Question

On December 1, Simpson Marketing Company received $2,700 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 debit to Earned Fees for $2,700.- a debit to Unearned Fees for $1,350.- a credit to Unearned Fees for $900.- a credit Earned Fees for $1,800.- a debit to Earned Fees for $1,800.

Answer 1

a debit to Unearned Fees for $1,350.

Step-by-step explanation:

As for the provided information, the details provided are:

Cash received for services to be provided up to 31 January, though cash is received on 1 December itself.

Since the accounting and financial year closes on 31 December the adjusting entry will be passed on the date for correcting the unearned revenue.

The unearned revenue has credit balance and as on 31 December such balance shall be debited and earned revenue related to the period up to 31 December shall be credited.

Accordingly total unearned revenue for 2 months = 1 Dec to 31 Jan = $2,700.

Therefore, total revenue for 31 December will be $2,700/2
`*` 1 = $1,350.

Accordingly unearned revenue will be debited by the amount and earned revenue will be credited by the same amount.