Question

Better Publications sold annual subscriptions to their magazine for $42,000 in December, 2016. The magazine is published monthly. The new subscribers received their first magazine in January, 2017. What adjustment should be made in January if the subscriptions were originally recorded as a liability?

Answer 1

Explanation:

The adjusting entry is as follows

On January 31

Unearned revenue A/c Dr $3,500

     To Magazine subscription  revenue A/c $3,500

(Being the unearned revenue is recorded)

The computation is shown below:

= Sale value of annual subscriptions ÷ total number of months in a year

= $42,000 ÷ 12 months

= $3,500