Question

Golddigger services inc. provides services to clients. on may 1, a client prepaid golddigger services $65,000 for 6-months services in advance. golddigger services' general journal entry to record this transaction will include a:

Answer 1

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.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.