Question

Northern Living Magazine sold 600 one-year subscriptions for $100 each on September 1, 2017. The total

amount received was recorded as Deferred Revenue when received. What would be the required adjusting
entry at December 31, 2017? No adjusting entries have been made yet regarding this transaction.
a. Debit Deferred Revenue $20,000, Credit Service Revenue $20,000
b. Debit Deferred Revenue $60,000, Credit Service Revenue $60,000
c. Debit Cash $20,000, Credit Deferred Revenue $20,000
d. Debit Deferred Revenue $40,000, Credit Service Revenue $40,000
e. Debit Service Revenue $40,000, Credit Deferred Revenue $40,000

Answer 1

The required adjusting entry at December 31, 2017, for Northern Living Magazine is to debit Deferred Revenue $60,000 and credit Service Revenue $60,000.

Step-by-step explanation:

The correct adjusting entry at December 31, 2017, for Northern Living Magazine would be:

• Debit Deferred Revenue $60,000
• Credit Service Revenue $60,000

This entry is necessary because the magazine sold 600 one-year subscriptions for $100 each. Since the subscriptions are for a year, only a portion of the revenue should be recognized in the current year. The remaining balance should be deferred.