The following data applies to the next two questions.
•Northern University has a fiscal year end of June 30.
•In June 2015, tuition and fees of $1,200,000 was assessed for the summer term that runs from June 1, 2015 through August 31, 2015. $1,200,000 was collected on June 1, 2015.
-What is the journal entry on June 1 for Northern?
A) Cash and Cash Equivalents 1,200,000 Operating Revenues-Student Tuition and Fees 400,000
Deferred Revenues-Student Tuition and Fees 800,000
B) Cash and Cash Equivalents 400,000 Cash and Cash Equivalents, Reserved 800,000
Operating Revenues-Student Tuition and Fees 400,000
Deferred Revenues-Student Tuition and Fees 800,000
C) Cash and Cash Equivalents 1,200,000 Operating Revenues-Student Tuition and Fees 1,200,000
D) Cash and Cash Equivalents 1,200,000 Deferred revenue 1,200,000

Question

Quizplus · Accepted Answer

The correct answer is A because the university received $1,200,000 in cash on June 1, 2015, for tuition and fees that will be earned over the three-month period from June 1, 2015, through August 31, 2015. Therefore, $400,000 of the cash received should be recognized as revenue in June 2015, and the remaining $800,000 should be deferred as unearned revenue.

The Following Data Applies to the Next Two Questions