Question

Magazine sells subscriptions for for issues. The company collects cash in advance and then mails out the magazines to subscribers each month. Apply the revenue recognition principle to determine a. when Magazine should record revenue for this situation. b. the amount of revenue Magazine should record for issues. a. Seacoast Magazine should record revenue whe

Answer 1

Answer:

a. It should record revenue on a monthly basis

The Revenue Recognition principle in accounting posits that revenue should only be recognized after the goods and services that the revenue was paid for, have been delivered.

Seacoast Magazine has not delivered the magazine and will do so monthly for 18 months. It should therefore apportion profits to those months and only recognize the profit after the magazines are delivered.

b. Amount of revenue for 8 issues:

= 36/ 18 issues * 8 issues

= 2 * 8

= $16