On July 1, 2016, Sean McConnell established his own accounting practice. Selected transactions for the first few days of July follow.
July 1 Signed a lease for an office and issued Check 101 for $14,700 to pay the rent in advance for six months.
1 Borrowed money from First National Bank by issuing a four-month, 9 percent note for $40,000; received $38,800 because the bank deducted the interest in advance.
1 Signed an agreement with Young Corp. to provide accounting and tax services for one year at $7,000 per month; received the entire fee of $84,000 in advance.
1 Purchased office equipment for $15,900 from Office Outfitters; issued a two-month, 12 percent note in payment. The equipment is estimated to have a useful life of five years and a $1,500 salvage value. The equipment will be depreciated using the straight-line method.
1 Purchased a one-year insurance policy and issued Check 102 for $1,740 to pay the entire premium.
3 Purchased office furniture for $16,080 from Office Warehouse; issued Check 103 for $8,480 and agreed to pay the balance in 60 days. The equipment has an estimated useful life of four years and a $1,200 salvage value. The office furniture will be depreciated using the straight-line method.
5 Purchased office supplies for $2,010 with Check 104. Assume $900 of supplies are on hand July 31, 2016.
1. Record the transactions on page 1 of the general journal. Omit descriptions. Assume that the firm initially records prepaid expenses as assets and unearned income as a liability.
2. Record the adjusting journal entries that must be made on July 31, 2016, on page 2 of the general journal. Omit descriptions.
What balance should be reflected in Unearned Accounting Fees at July 31, 2016?