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A customer prepaid $1,000 recorded as Unearned Fees; by month-end $600 has been earned. What amount of Unearned Fees remains as a liability on the statement of financial position?
A$1,000
B$600
C$400
D$0
Answer & Solution
Correct answer: C. $400
1. Earned during the month $= \$600$, which is moved to revenue.
2. Remaining liability $= 1{,}000 - 600 = 400$.
3. So C is correct.
4. B is the amount earned (now revenue); A is the original prepayment; D would require the whole job to be complete.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §2.4.1 "Unearned Fees—Deferred Revenue", p.78_