Question

Advance Payments for Goods The Petaluma Daily Times Corporation (CDT) publishes a daily newspaper. A 52-week subscription sells for $260. Assume that CDT sells 100 subscriptions on January 1. None of the subscriptions are cancelled as of March 31. a. Prepare a journal entry to record the receipt of the subscriptions on January 1. b. Prepare a journal entry to record one week of earned revenue on March 25. Round all answers to the nearest dollar.

Answer 1

Answer:

The Journal entries are as follows:

(i) On January 1,

Cash  A/c    Dr. 26,000

To Unearned subscription revenue  26,000

(To record the receipt of the subscriptions)

(ii) On March 25,

Unearned subscription revenue A/c   Dr. $500

To subscription revenue                                      $500

(To record the one week of earned revenue)

Working notes:

subscription revenue for 1 week = 260 × 100 × (1 ÷ 52 )

                                                       = $500