Pavillion Company experienced the following events and transactions during July:
ID: 2487358 • Letter: P
Question
Pavillion Company experienced the following events and transactions during July:
July 1 Received $4,000 in advance of performing work for Andrew Ranking.
6 Received $16,800 in advance of performing work for Matt Swarbuck.
12 Completed the job for Andrew Ranking.
18 Received $15,000 in advance of performing work for Drew Sayer.
27 Completed the job for Matt Swarbuck.
31 The job for Drew Sayer has not been started.
a. Give journal entries (including any adjusting entry as of the end of the month) to record these items using the procedure of initially crediting the Unearned Fees account when a payment is received from a customer in advance of performing services.
b. Give journal entries (including any adjusting entry as of the end of the month) to record these items using the procedure of initially crediting the Fees Earned account when a payment is received from a customer in advance of performing services.
c. Under each method, determine the amount of earned fees that should be reported on the income statement for July and the amount of unearned fees that should appear on the balance sheet as of July 31.
Explanation / Answer
Journal entries
Date
Accounts
Debit
Credit
July 1
Cash
$4,000
To Unearned fees
$4,000
July 6
Cash
16,800
To Unearned fees
16,800
July 12
Unearned fees
4,000
To Fees earned
4,000
July 18
Cash
15,000
To Unearned fees
15,000
July 27
Unearned fees
16,800
To fees earned
16,800
July 31 no entry
Income statement
Fees earned $20,800
Balance sheet
Unearned fees $15,000
Journal entries
Date
Accounts
Debit
Credit
July 1
Cash
$4,000
To Unearned fees
$4,000
July 6
Cash
16,800
To Unearned fees
16,800
July 12
Unearned fees
4,000
To Fees earned
4,000
July 18
Cash
15,000
To Unearned fees
15,000
July 27
Unearned fees
16,800
To fees earned
16,800
July 31 no entry
Income statement
Fees earned $20,800
Balance sheet
Unearned fees $15,000
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