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Paula Gomes
Mar 5, 2007, 08:47 AM
How should I calculate and record the adjusting entry presented below in the trial balance on December 31,2005:

On November 1, 2005 a company agreed to do a six-month course for a client, with a monthly fee of $2,200. The client paid the first five months' fees in advance.
When the cash was received, the Unearned Extension Fees account was credited.

Thank you

Paula

randyhu
Mar 5, 2007, 11:32 PM
That is correct... it is unearned until the calender date has passed.

bhet
Mar 6, 2007, 08:18 PM
Dr. Unearned extension fees 2200
Cr. Earned extension fees 2200

Adjusting entry should be made to the extent of the earned extension fee. Since only 1 month has passed only the 1 month expired should be acounted as earned

CaptainForest
Mar 6, 2007, 11:32 PM
It would either be:

Dr. Expense 4,400
Cr. Prepaid 4,400

Or
Dr. Unearned Revenue 4,400
Cr. Revenue 4,400

2 months x 2,200 per month = 4,400

I am unclear as to who you are needing the JE for.