Answer:
a. The company should recognize one-twelfth (1/12) of each subscribers' cash advance each month for 12 months.
b. The amount of revenue the company should record for eight issues is $40 [$60 × 8/12].
Explanation:
The revenue recognition principle dictates that revenue is recognized in the period in which it is earned. When the company collects cash in advance for each subscription, it should record the $60 to a liability account like Cash Advances, Customer Advances, Unearned Revenue, or Deferred Revenue. Every month for 12 months, the company should recognize one-twelfth (1/12) of each subscribers' cash advance (or $5) as Subscriptions Revenue, Sales Revenue, or Earned Revenue. Therefore, if issues have been delivered for eight months now, the company should have recorded $40 of each $60 subscription.
Solution :
Assets = Liabilities + Paid in capital + retained earnings
1. $ 300,000 $ 300,000
2. $ 30,000 $ 30,000
3. $ 90,000 $ 90,000
4. $ 50,000 $ 50,000
5. $ 5,000 $ 5,000
6. $ 6,000 $ 6,000
7. $ 70,000 $ 70,000
8. --
9. $ 1,000 $ 1,000
Point 4 -- the accounts receivable will increase by $ 120,000 due to the credit sales and the cost of goods sold.
Point 6 -- Adjustments entry at the year end for 3 months from January to March 2022 should be reduced from both assets and retained earnings and the adjusted amount would be $ 4500.
Point 8 -- No impact as the cash is collected against the account receivable and both are assets.
Answer: c.) hire less labor and rent more capital
Explanation:
To answer this we would need to find out the Marginal cost per dollar of producing with either form of production being labour or capital.
The Marginal Product of Labour is 20 units resulting from $4 dollars so that means that for every dollar spent on Labour we get,
= 20/4
= 5 units of output.
However, The Marginal Product of renting Capital is 30 units resulting from $5 dollars so that means that for every dollar spent on Capital we get,
= 30/5
= 6 units of output.
This means that renting Capital is more efficient because we get 1 more unit of output per dollar and so to minimize cost of production without changing the level of output, the firm should hire less labor and rent more capital.
