Question

On October 1, 2019, Paige Turner Publishing received $60,600 in cash for subscriptions covering one year, recording the entry as a debit to Cash and a credit to Unearned Subscriptions. The correct adjusting entry at December 31, 2019, is
-Debit Unearned Subscriptions $5,050; credit Subscriptions Income $5,050.

-Debit Unearned Subscriptions $15,150; credit Subscriptions Income $15,150.

-Debit Unearned Subscriptions $60,600; credit Subscriptions Income $60,600

-Debit Subscriptions Income $15,150; credit Unearned Subscriptions $15,150.

Answer 1

Answer:

Debit Unearned Subscriptions $15,150;

credit Subscriptions Income $15,150.

Explanation:

Given,

Unearned subscription = $60,600 for 1 year or 12 months

Monthly subscription income = $60,600 ÷ 12

Monthly subscription income = $5,050

Since the company received cash in advance on October 1, 2019, and the financial year closes at December 31, 2019. Therefore, Paige Turner has earned 3 months (October, November, and December) subscription income.

Therefore, subscription income for the three months = $5,050 × 3 = $15,150.

As the liability becomes expired and turns into an income, therefore, liability decreases, and income increases.

Liability decreases = Debit (Unearned Subscription) $15,150

Income increases = Credit (Subscription income) $15,150