Golddigger services inc. provides services to clients. on may 1, a client prepaid golddigger services $65,000 for 6-months servi

Question

zaharov [31]

3 years ago

13

Golddigger services inc. provides services to clients. on may 1, a client prepaid golddigger services $65,000 for 6-months servi

ces in advance. golddigger services' general journal entry to record this transaction will include a:

Business

1 answer:

Nikolay [14] · Answer 1 · 2022-05-10T01:58:40+03:00

If these are the missing choices:
a.Debit to Unearned Revenue for $65,000.
b.Credit to Management Fee Revenue for $65,000.
c.Credit to Cash for $65,000.
d.Credit to Unearned Revenue for $65,000.
e.<span>Debit to Management Fees Revenue for $65,000.

My answer is: D. Credit to Unearned Revenue for $65,000.

May 1 journal entry will also have a debit of Cash for $65,000.

Since it is a prepayment, it means that Golddigger Services Inc. has a liability to perform the services that have been prepaid.

May 31 journal entry will have a debit to Unearned Revenue and a credit to Earned Revenue for 10,833.33. This is for the services earned for the 1st month.

65,000 / 6 months = 10,833.33 per month.

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