Question

Great Kids Co. began providing day care for the children of employees of a large corporation on January 15 for an agreed monthly fee of $9,000. The first payment is to be received on February 15. The adjusting entry required by Great Kids Co. on January 31 includes:________
A. A credit to Child Care Fees Earned of $4,500.
B. A debit to Child Care Fees Receivable of $9,000.
C. A debit to Unearned Child Care Revenue of $4,500.
D. A debit to Fees Receivable of $9,000.

Answer 1

Answer:

A. A credit to Child Care Fees Earned of $4,500.

Explanation:

The journal entry to record this given transaction is shown below:

Cash A/c Dr $4,500

       To Child Care Fees Earned A/c $4,500

(Being the fees earned is recorded)

Since the payment is received that means cash balance is increased so we debited the cash account and credited the child care fees earned account.

The monthly fee is $9,000 but we have to compute for 15 days, so it would be

= $9,000 ÷ 2

= $4,500