Question

Moreno Company publishes a monthly sports magazine, Fishing Preview. Subscriptions to the magazine cost $23 per year. During November 2014, Moreno sells 25,800 subscriptions beginning with the December issue. Moreno 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.a.Prepare the entry in November for the receipt of the subscriptionsb.Prepare the adjusting entry at December 31, 2014, to record sales revenue recognized in December 2014.c.Prepare the adjusting entry at March 31, 2015, to record sales revenue recognized in the first quarter of 2015.

Answer 1

(A)

Unearned Subscription Revenue 593,400

Cash 593,400

to record receips from subscriptions Nov 30th

Unearned Subscription Revenue 49,450

Subscription Revenue 49,450

to record accrued subscriptions Dec 31th

Unearned Subscription Revenue 148,350

Subscription Revenue 148,350

to record accrued subscriptions march 31th

Step-by-step explanation:

(A)

25,800 subscriptions x $23 each

On novemeber the business do not deliver any magazine, so their revenue is not earned. They have the obligation to deliver the magazines for a year.

(B)

593,400 for the year

we divide by 12 to get the monthly earned revenue

Subscription Revenue: 49,450

As the times passes and the magazines are delivered, the revenue for the subscriptions is recognize.

(C)

49,450 per month x 3 month = 148,350

on march 31th we recognize the accrued revenue for three months, so the amount is multiplied.