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Adjustment for Unearned Fees The balance in the unearned fees account, before adjustment at the end...

Adjustment for Unearned Fees

The balance in the unearned fees account, before adjustment at the end of the year, is $1,375,000. What is the adjustment if the amount of unearned fees at the end of the year is $1,100,000? Indicate each account affected, whether the account is increased or decreased, and the amount of the increase or decrease.

Unearned fees

$

Fees earned

$
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Homework Answers

Answer #1

Unearned fees is the amount of fees received in advance towards services which are yet to be provided. Unearned fees is a current liability

An amount equal to fees earned during the period for services provided is transferred from unearned fees account to Fees earned account (Income) at the end of the year

Amount to be transferred

= Opening balance of unearned fees – Closing balance of unearned fees

= $1,375,000 - $1,100,000

= $275,000

Journal entry

Unearned fees    $275,000

    Fees earned          $275,000

(Being fees earned towards services provided transferred from unearned fees to fees earned)

Unearned fees – Will decrease – By $275,000

Fees earned – Will increase – By $275,000

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