Question

Pickett Company typically sells subscriptions on an annual basis, and publishes six times a year. The magazine sells 90,000 subscriptions in January at $15 each. What entry is made in January to record the sale of the subscriptions?

A)
Subscriptions Receivable
1,35000
Subscription Revenue
1,35000
B)
Cash
1,350,000
Unearned Subscription Revenue
1,350,000
C)
Subscriptions Receivable
225,000
Unearned Subscription Revenue
225,000
D)
Prepaid Subscriptions
1,350,000
Cash
1,350,000

Answer 1

The correct entry to record the sale of the subscriptions in January is option B) Cash 1,350,000 Unearned Subscription Revenue 1,350,000.

Step-by-step explanation:

The correct entry to record the sale of the subscriptions in January is option B) Cash 1,350,000 Unearned Subscription Revenue 1,350,000.

This is because when the subscriptions are sold, the company receives cash and the revenue is unearned at this point because the magazines have not been published yet.

Therefore, the cash received is debited (increased) and the unearned subscription revenue is credited (increased) to reflect the sale.