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On March 31, 2009, Phoenix, Inc. paid Melanie Publishing Company $15,480 for a 3-year subscription for five different magazines. The subscriptions started immediately. What is the adjusting entry that should be recorded by Melanie Publishing Company on December 31, 2009 if the credit to record the collection was made to Unearned Fees?

Answer :

Answer:

Unearned Revenue A/c  Dr.      $3,870

               To Fees Earned                         $3,870

Explanation:

As provided, the subscription is for 3 years. That means 36 months.

That means one month amount of revenue = $15,480/36 = $430

Subscription amount is received on 31 March 2009.

That means revenue for the year earned is for the period = 1 April to 31 December 2009. = 9 months.

Earned revenue = $430 [tex]\times[/tex] 9 = $3,870

For this, earlier entry was done by crediting unearned revenue.

Now, on 31 December entry shall be:

Unearned Revenue A/c  Dr.      $3,870

               To Fees Earned                         $3,870

In this manner the unearned revenue is converted into earned income.

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