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Crane Company Ltd. publishes a monthly sports magazine, Fishing Preview. Subscriptions to the magazine cost $15 per year. During November 2017, Crane sells 12,480 subscriptions for cash, beginning with the December issue. Crane prepares financial statements quarterly and recognizes subscription revenue at the end of the quarter. The company uses the accounts Unearned Subscription Revenue and Subscription Revenue. The company has a December 31 year-end.
Required:
1. Prepare the entry in November for the receipt of the subscriptions. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
2. Prepare the adjusting entry at December 31, 2017, to record subscription revenue in December 2017.

Respuesta :

Answer:

The journal entries are as follows:

(i) On November 17,

Cash A/c Dr. $187,200

      To unearned subscription A/c  $187,200

(To record the unearned subscription)

Workings:

Cash:

= Subscriptions to the magazine cost per year × Subscriptions sold

= $15 × 12,480

= $187,200

(ii) On December 31st,

Unearned subscription A/c Dr. $15,600

              To Subscription revenue A/c    $15,600

(To record the one month income recognized for December)

Workings:

Unearned subscription:

= $187,200 × (1 ÷ 12)

= $15,600

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