Question

Question: Costanza Company experienced the following events and transactions during July. The company has the

following partial chart of accounts: Cash; Accounts Receivable; Unearned Fees; Fees Earned.

July 1 Received \(3,000 cash in advance of performing work for Vivian Solana.

6 Received \)7,500 cash in advance of performing work for Iris Haru.

12 Completed the job for Solana.

18 Received $8,500 cash in advance of performing work for Amina Jordan.

27 Completed the job for Haru.

31 None of the work for Jordan has been performed.

A a. Prepare journal entries (including any adjusting entries as of the end of the month) to record these

events using the procedure of initially crediting the Unearned Fees account when payment is received

from a customer in advance of performing services.

b. Prepare journal entries (including any adjusting entries as of the end of the month) to record these

events using the procedure of initially crediting the Fees Earned account when payment is received

from a customer in advance of performing services.

c. Under each method, determine the amount of earned fees reported on the income statement for July

and the amount of unearned fees reported on the balance sheet as of July 31.

Short answer

Earned fees are $10,500

Step-by-step solution

Definition of unearned fees

The amount received in advance is known as unearned fees.

Necessary journal entries by initially crediting earned fees

The amount of fees reported in the income statement is $10,500, and unearned fees reported in the balance sheet are $8,500.