Question

A publishing company publishes a monthly magazine. At the end of the year, the Unearned Subscription Income account had a balance of $150,000. During the year, $100,000 of magazines were delivered and income was earned. After the adjusting entry to recognize income is recorded, the Unearned Subscription Income account will have a:

Answer 1

The answer is:

An unearned subscription has a credit balance of $50,000.

Step-by-step explanation:

Unearned Subscription Income is the income that has been received but has not been earned. Unearned subscription income is treated as a liability because the customer can decide to terminate the contract at any time and the fund must be repaid to the customer.

Unearned subscription income balance was $150,000

$100,000 worth of magazine has been delivered

So, the remaining balance in the unearned subscription income is now $50,000($150,000 - $100,000)

Because it is a liability and a debit decreases a liability while a credit increases a liability.

With this, unearned subscription has a credit balance of $50,000.