Question

On April 1, Griffith Publishing Company received $2,088 from Santa Fe, Inc. for 36-month subscriptions to several different magazines. The subscriptions started immediately. What is the amount of revenue that should be recorded by Griffith Publishing Company for the first year of the subscription assuming the company uses a calendar-year reporting period?

a. $522
b. $0
c. $174
d. $58
e. $696

Answer 1

For the first year, Griffith will record a revenue of $522. So, option a is the correct answer.

Step-by-step explanation:

The amount received on 1 April for 36 month subscription is the unearned subscription revenue that will be earned evenly throughout the coming 36 months period starting from April.

The month subscription revenue is,

Monthly subscription revenue = 2088 / 36 = $58 per month

The calendar year ends on 31 December. Following the accrual principle, we will record the revenue as subscription revenue for the period of 9 months from April to December for the year.

The amount of revenue that is to be recorded for the first year is,

Revenue = 58 * 9 = $522