Question

You are the regional sales manager for Standard Publishing Co. The company is preparing adjusting entries for the year ended March 31, 2021. On September 1, 2020, customers in your region paid $180,000 cash for three-year magazine subscriptions beginning on that date. The magazines are published and mailed to customers monthly. These were the only subscription sales in your region during the year. What amount should be reported on the income statement for subscription revenue for the year ended March 31, 2021

Answer 1

Standard Publishing Co.

The amount of subscription revenue that should be reported on the income statement for the year ended March 31, 2021 is:

= $35,000.

Step-by-step explanation:

a) Data and Calculations:

September 1, 2020 Cash receipt for magazine subscriptions for three years = $180,000

This subscriptions is equal to 36 months subscription.

The amount of subscription revenue to report for the year ended March 31, 2021 = $35,000 ($180,000 * 7/36).

From the above calculation, a month's subscription revenue = $5,000 ($180,000/36)

Therefore, seven months' subscription from September 1, 2020 to March 31, 2020 = $35,000 ($5,000 * 7).

The unearned subscription revenue is debited with $35,000, while earned subscription revenue is credited with the same amount.