Question

On April 1, Garcia Publishing Company received $33,480 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 first year?

Answer 1

Unearned Fees A/c Dr. $8,370;

Fees Earned A/c Cr. , $8,370.

Step-by-step explanation:

The amount of $33,480 paid is for 36 months. Subscription per months will be $33,480 divided by 36 months

=$33,480 / 12

=$930

The subscription was paid on April 1st. Between April 1st and December 31st, there were 9 months.

The subscriptions for that year will be

= $930 x 9

=$8,370

The journal entries will be as follow

Unearned Fees A/c Dr. $8,370;

Fees Earned A/c Cr. , $8,370.