Question

Mantle Publications publishes a golf magazine for women. The magazine sells for $4.00 a copy on the newsstand. Yearly subscriptions to the magazine cost $36 per year (12 issues). In December 2016, Mantle Publications sells 4,000 copies of the golf magazine at newsstands and receives payment for 6,000 subscriptions for 2017. Financial statements are prepared monthly.

a. Indicate the accounts increased or decreased to record the December newsstand sales and subscriptions received.
b. Indicate the accounts increased or decreased for the necessary adjustment on January 31, 2017. The January 2017 issue has been mailed to subscribers.

Answer 1

Accounting uses the Revenue recognition principle which means that a business should only recognize revenue when it has provided the service for which it was paid for.

a.

Date Account Title Debit Credit

12/31/2016 Cash $16,000

Sales Revenue $16,000

Working

= 4,000 issues sold for December * $4 per copy

= $16,000

Date Account Title Debit Credit

12/31/2016 Cash $216,000

Unearned Subscription Revenue $216,000

Working

= 6,000 subscriptions * $36 per subscription

= $216,000

b.

Date Account Title Debit Credit

12/31/2016 Unearned Subscription Revenue $18,000

Sales revenue $18,000

Working

= 216,000 * 1/ 12 months

= $18,000