Question

Kingbird Company publishes a monthly sports magazine, Fishing Preview. Subscriptions to the magazine cost $27 per year. During November 2019, Kingbird sells 26,976 subscriptions beginning with the December issue. Kingbird prepares financial statements quarterly and recognizes subscription revenue at the end of the quarter. The company uses the accounts Unearned Subscription Revenue and Subscription Revenue.

a. Prepare the entry in November for the receipt of the subscriptions
b. Prepare the adjusting entry on December 31, 2019, to record sales revenue recognized in December 2019.
c. Prepare the adjusting entry on March 31, 2020, to record sales revenue recognized in the first quarter of 2020.

Answer 1

Answer and Explanation:

As per the data given in the question,

a) Cash A/c Dr. $728,352

To unearned subscription revenue A/c. $728,352

($27×26,976)

( Being receipt of subscription is recorded)

b) Unearned subscription revenue A/c Dr. $60,696

To subscription revenue A/c. $60,696

($728,352÷12)

( Being sales revenue is recorded)

c) Unearned subscription revenue A/c Dr. $182,088

To subscription revenue A/c. $182,088

($728,352×3÷12)

( Being sales revenue in first quarter is recorded)