If Throughout an Accounting Period the Fees for Legal Services

question 3

Multiple Choice

If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Fees, the end-of-period adjusting entry to record the portion of those fees that has been earned is:

• A) Debit Legal Fees Earned and credit Unearned Legal Fees.
• B) Debit Unearned Legal Fees and credit Accounts Receivable.
• C) Debit Cash and credit Legal Fees Earned.
• D) Debit Cash and credit Unearned Legal Fees.
• E) Debit Unearned Legal Fees and credit Legal Fees Earned.

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Definitions:

GAAP

The standardized set of accounting principles, standards, and procedures issued by the Financial Accounting Standards Board (FASB) for companies in the U.S.

Fair Value

The income from offloading an asset or the charge for transferring a liability in a methodical exchange among participants in the market at the time of determining its value.

Orderly Transaction

A transaction executed in an organized manner where both buyer and seller have access to all pertinent information and neither is under undue pressure.

Form 10-K

An annual report required by the U.S. Securities and Exchange Commission that gives a comprehensive summary of a company's performance.