Question

Get in Shape, a healthy living magazine, collected $528,000 in subscription revenue on April 31. Each subscriber will receive an issue of the magazine in each of the next 12 months, beginning with the May issue. The company uses the accrual method of accounting. What is the balance in the Unearned Revenue account as of December 31?

A. $176,000
B. $352,000
C. $528,000
D. $220,000
E. None of the above

Answer 1

To find the balance in the Unearned Revenue account as of December 31, we subtract the revenue recognized from May to December ($352,000) from the total subscription revenue ($528,000), resulting in a balance of $176,000.

Step-by-step explanation:

The balance in the Unearned Revenue account on December 31 can be determined by calculating the amount of subscription revenue that should be recognized by Get in Shape magazine from April 31 through December 31. The company collected $528,000 for the entire 12 months. To find the monthly subscription revenue, divide the total amount by 12 months, which gives $44,000 per month. From May to December, there are 8 months, so 8 months of revenue, equaling $352,000, will be recognized. The remaining balance of unearned revenue at the end of December will be $528,000 minus $352,000, which is $176,000.