Question

​Wellness, a healthy living​ magazine, collected $ 516 comma 000$516,000 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 balance in the Unearned Revenue account as of December​ 31?

Answer 1

$215000

Explanation:

The company using the accrual method means that it it records revenue when it is earned and expenses when they are incurred. Therefore the company at 31 December will have a revenue for 7 months of beginning of April until end of December. This value is 7/12 multiplied by the $516000 because a 12 month period will end on the 31st of May for the following year. Therefore the unearned revenue balance will equal $215000 because $516000 - $301000(the 7 months that were earned until 31 Decemeber) = $215000 .