Question

Wildhorse Co. Ltd. publishes a monthly sports magazine, Fishing Preview. Subscriptions to the magazine cost $20 per year. During November 2017, Wildhorse sells 7,380 subscriptions for cash, beginning with the December issue. Wildhorse 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.
2. Prepare the adjusting entry at December 31, 2017, to record subscription revenue in December 2017.

Answer 1

Answer:

1. Prepare the entry in November for the receipt of the subscriptions.

November 30, 2017

Dr Cash 147,600

    Cr Unearned subscription revenue 147,600

Unearned subscription revenue = $20 x 7,380 = $147,600

2. Prepare the adjusting entry at December 31, 2017, to record subscription revenue in December 2017.

Dr Unearned subscription revenue 12,300

    Cr Subscription revenue 12,300

Subscription revenue = $147,600 / 12 months (only December) = $12,300