{"id":220983,"date":"2025-05-29T05:17:16","date_gmt":"2025-05-29T05:17:16","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=220983"},"modified":"2025-05-29T05:17:18","modified_gmt":"2025-05-29T05:17:18","slug":"the-company-credited-unearned-fees-for-the-amount-received-and-the-subscriptions-started-immediately","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/05\/29\/the-company-credited-unearned-fees-for-the-amount-received-and-the-subscriptions-started-immediately\/","title":{"rendered":"The company credited Unearned Fees for the amount received and the subscriptions started immediately."},"content":{"rendered":"\n<p>On April 1, Garcia Publishing Company received $19,080 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? Multiple Choice:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>debit Unearned Fees, $19,080; credit Fees Earned, $19,080.<\/li>\n\n\n\n<li>debit Unearned Fees, $4,770; credit Fees Earned, $4,770.<\/li>\n\n\n\n<li>debit Unearned Fees, $1,590; credit Fees Earned, $1,590.<\/li>\n\n\n\n<li>debit Unearned Fees, $14,310; credit Fees Earned, $14,310.<\/li>\n\n\n\n<li>debit Unearned Fees, $6,360; credit Fees Earned, $6,350.<\/li>\n<\/ul>\n\n\n\n<p><strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-ast-global-color-0-color\">The Correct Answer and Explanation is:<\/mark><\/strong><\/p>\n\n\n\n<p><strong>Correct Answer:<\/strong><br><strong>Debit Unearned Fees, $4,770; Credit Fees Earned, $4,770.<\/strong><\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Explanation:<\/strong><\/h3>\n\n\n\n<p>On <strong>April 1<\/strong>, Garcia Publishing Company received <strong>$19,080<\/strong> from Otisco, Inc. for <strong>36-month<\/strong> magazine subscriptions. The entire amount was initially recorded as <strong>Unearned Fees<\/strong>, which is a liability, because the company had not yet provided the services (magazines) at the time of receiving the payment.<\/p>\n\n\n\n<p>The subscriptions <strong>started immediately<\/strong> on April 1. Therefore, revenue starts accruing from that date, and the company earns a portion of the revenue each month as the magazines are delivered.<\/p>\n\n\n\n<p>Since adjustments are only made at <strong>year-end (December 31)<\/strong>, we need to determine how many months of the subscription have been earned by December 31 of the <strong>first year<\/strong>:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>From April 1 to December 31 is <strong>9 months<\/strong>.<\/li>\n<\/ul>\n\n\n\n<p>To calculate the amount of revenue earned over those 9 months:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Monthly Revenue Earned<\/strong> =<br>$19,080 \u00f7 36 months = <strong>$530 per month<\/strong><\/li>\n\n\n\n<li><strong>Revenue Earned from April to December<\/strong> =<br>9 months \u00d7 $530\/month = <strong>$4,770<\/strong><\/li>\n<\/ol>\n\n\n\n<p>Thus, on December 31, Garcia Publishing must adjust its books to recognize this earned revenue. The adjusting entry is:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Debit Unearned Fees<\/strong> (to reduce the liability) = <strong>$4,770<\/strong><\/li>\n\n\n\n<li><strong>Credit Fees Earned<\/strong> (to recognize revenue) = <strong>$4,770<\/strong><\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Why the Other Answers Are Incorrect:<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>$19,080<\/strong>: This would mean recognizing the full amount, which is incorrect because only 9 months of the 36-month subscription have been earned.<\/li>\n\n\n\n<li><strong>$1,590<\/strong>: This represents only 3 months of revenue, which is too little.<\/li>\n\n\n\n<li><strong>$14,310<\/strong>: This would be 27 months of revenue, which is too much.<\/li>\n\n\n\n<li><strong>$6,360<\/strong>: This is 12 months of revenue, but only 9 months have passed by year-end.<\/li>\n<\/ul>\n\n\n\n<p>Therefore, the correct adjusting entry is to recognize <strong>$4,770<\/strong> in earned revenue.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" src=\"https:\/\/learnexams.com\/blog\/wp-content\/uploads\/2025\/05\/learnexams-banner7-82.jpeg\" alt=\"\" class=\"wp-image-220984\"\/><\/figure>\n","protected":false},"excerpt":{"rendered":"<p>On April 1, Garcia Publishing Company received $19,080 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 [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-220983","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/220983","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=220983"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/220983\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=220983"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=220983"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=220983"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}