Question

During August of 2011 Nickle Publishing received $24,000 for 1-year subscriptions to a new magazine. Magazines are mailed to subscribers each month, starting in September of 2011. What adjusting entry should Nickle make on Dec. 31, 2011?

Answer 1

Debit Unearned/Deferred revenue $8,000

Credit Sales revenue (p/l) $8,000

Being entries to recognized earned revenue for the period

Step-by-step explanation:

August of 2011, 1 year subscription of $24,000

Revenue earned per month = $24,000/12 = $2,000

Revenue earned (between September and December) = $2,000 × 4

= $8,000

To recognize this, adjusting entries required on Dec. 31, 2011

Debit Unearned/Deferred revenue $8,000

Credit Sales revenue (p/l) $8,000

Being entries to recognized earned revenue for the period