Question

On April 1, Griffith Publishing Company received $33,480 from Santa Fe, 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 Griffith Publishing Company on December 31 of the first year?
a. debit Unearned Fees, $20,880; credit Fees Earned, $33,480.
b. debit Unearned Fees, $6,960; credit Fees Earned, $6,960.
c. debit Unearned Fees, $15,660; credit Fees Earned, $15,660.
d. debit Unearned Fees, $1,740; credit Fees Earned, $1,740.
e. debit Unearned Fees, $5,220; credit Fees Earned, $5,220.

Answer 1

Answer:

Debit Unearned Fees, $8,370

Credit Fees Earned, $8,370

Explanation:

Based on the information given we were told that the Company received the amount of $33,480 from Santa Fe for 36 month on April 1 in which we are to assumed that the adjustments will be made at the year end this means that the adjusting entry will be to:

Debit Unearned Fees, $8,370

Credit Fees Earned, $8,370

Calculated as :

Amount received $33,480/36 months ×9 months

=$8,370

Note that from 1st April to 31st December will give us 9 months.