Question

Healthy Living, a diet magazine, collected $240,000 in subscription revenue on May 31. Each subscriber will receive an issue of the magazine in each of the next 12 months, beginning with the June issue. The company uses the accrual method of accounting. What is the amount of Subscription Revenue that has been earned by the end of December?
A) $100,000
B) $180,000
C) $240,000
D) $140,000

Answer 1

Answer:

Revenue that has been earned by the end of December is $ 140,000

Explanation:

When entity uses the accrual method of accounting, the transaction is recorded as and when it occurs.

The subscription revenue received relates to services to be rendered over 12 months. Therefore the Revenue is recognised as magazines are issued over - time.

From the first issue June to end of December , there exists 7 issues of magazines.

Revenue to be recognised = $240,000 × 7/12

                                             = $ 140,000