Question

caden started a new publication called contest news. its subscribers pay $42 to receive 12 monthly issues. with every new subscriber, caden debits cash and credits unearned subscription revenue for the amounts received. the company has 100 new subscribers as of july 1st, 2017. it sends contest news to each of these subscribers every month from july through december. assume no changes in subscribers, prepare the journal entry that caden must make as of December 31st, 2017, to adjust the subscription revenue account and the unearned subscription revenue account. What does the current account balance equal?

Answer 1

• Total new subscription = 100
• Subscription revenue per subscriber = $ 42
• Total Unearned Subscription Revenue on Jul 1, 2017 = 100 x $ 42 = $ 4,200
• Subscription received for = 12 months
• No. of months from 1 July 2017 to 31 Dec 2017 = 6 months
• Subscription Revenue earned till 31 Dec 2017 = $ 4,200 x 6/12 = $ 2,100 [Adjustment amount]
• Requirement 1:
  Adjustment entry

Date	Accounts title	Debit	Credit
31-Dec-17	Unearned Subscription Revenue	$2,100
	Subscription Revenue		$2,100
	(to record revenue earned for 6 months)

• Requirement 2: Current Account balances on 31 Dec 2017:
  >Unearned Subscription Revenue = $ 2,100 Credit (Liability) [4200 – 2100]

>Subscription Revenue = $ 2,100 Credit (Revenue)