Patricia Event Planning Service collects fees from their customers in advance.On 1 January 2016,the balance of her Unearned revenue account had a balance of $5000 (Cr. ).During January and February,she collected $3000 and $700 as advance fees.During the two-month period,she rendered services of $7500 .What is the balance in Unearned revenue at the end of February?
A)Debit balance of $1200
B)Credit balance of $1200
C)Debit balance of $5000
D)Credit balance of $5000

Question

Quizplus · Accepted Answer

At the beginning of January, the Unearned Revenue account had a credit balance of $5000. Then, during January and February, Patricia collected $3000 + $700 = $3700 in advance fees. This increases the credit balance of the Unearned Revenue account to $5000 + $3700 = $8700.

However, during the same two-month period, she also provided services worth $7500. This means that $7500 of the revenue has been earned and should no longer be recorded as unearned revenue.

Therefore, the balance in the Unearned Revenue account at the end of February can be calculated as follows:

Beginning Balance (+) Advance fees collected (-) Revenue earned = Ending Balance

$5000 (+) $3700 (-) $7500 = $1200 (credit balance)

So the correct answer is B, a credit balance of $1200.

Patricia Event Planning Service Collects Fees from Their Customers in Advance.On