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22 April, 22:50

Aggie Fitness began business in College Station, TX on June 1, 2018. At that time, the company collected $6,000 in advance payments from customers for 12-month gym memberships. At December 31, 2018, after the adjusting entries are recorded and posted, the balances in Unearned Revenue and Membership Revenue should be, respectively, a. $3,000, $3,000b. $2,500, $3,500c. $6,000, $0d. $0, $6,000e. $3,500, $2,500

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  1. 23 April, 01:47
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    b. $2,500, $3,500

    Explanation:

    Amount collected in advance will be recognized as a liability until the revenue is earned. Entries are posted between the cash account and deferred revenue account on collection of cash.

    Given that he company collected $6,000 in advance payments from customers for 12-month gym memberships on June 1, 2018.

    Debit Cash account $6,000

    Credit Unearned revenue $6,000

    After 7 months (between 1 June and 31 December 2018),

    Revenue earned = 7/12 * $6,000 = $3,500

    On December 31, 2018,

    Debit Unearned revenue $3,500

    Credit Membership Revenue $3,500

    Balance in unearned revenue accounts = $6,000 - $3,500 = $2,500

    Balance in Membership revenue = $3,500
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