Question

Pharoah Company Ltd. publishes a monthly sports magazine, Fishing Preview. Subscriptions to the magazine cost $28 per year. During November 2022, Pharoah sells 6,900 subscriptions for cash, beginning with the December issue. Pharoah 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. The company has a December 31 year-end. Prepare the entry in November for the receipt of the subscriptions.

Answer 1

Answer and Explanation:

The Journal entry is shown below:-

On November 2022

Cash Dr, $193,200 (6,900 × $28)

To Unearned Subscription Revenue $193,200

(Being the receipt of the subscriptions is recorded)

Therefore to record the receipt of the subscriptions we simply debited the cash as it increased the assets and we credited the unearned subscription revenues as increased the liability so that the correct posting could be done