Question

On april 1, griffith publishing company received $1,548 from santa fe, inc. for 36-month subscriptions to several different magazines. the company credited unearned fees for the amount received and the subscriptions started immediately. what is the adjusting entry that should be recorded by griffith publishing company on december 31 of the first year

Answer 1

Given:
April 1 - Griffith publishing company received $1,548 from Santa Fe, inc. for 36-month subscriptions.

1,548 / 36 months = 43 per month.

Assuming that the amount is paid in cash.

Debit Credit
April 1:
Cash 1,548
Unearned Revenue 1,548

April 30:
Unearned Revenue 43
Revenue Fees 43

May 31:
Unearned Revenue 43
Revenue Fees 43

June 30:
Unearned Revenue 43
Revenue Fees 43

July 31
Unearned Revenue 43
Revenue Fees 43

August 31:
Unearned Revenue 43
Revenue Fees 43

September 30:
Unearned Revenue 43
Revenue Fees 43

October 31:
Unearned Revenue 43
Revenue Fees 43

November 30:
Unearned Revenue 43
Revenue Fees 43

December 31:
Unearned Revenue 43
Revenue Fees 43

Book Value of Unearned Revenue is: 1,548 - (43*9) = 1,548 - 387 = 1,161

Since it is a monthly subscription, the unearned revenue must always have an adjusting entry at the end of the month because Griffith company has already earned some of the prepaid fees.