Question

30. On May 1, 2019, Luke paid LinkedIn $1,200 for his 2-year subscription for online professional...

30. On May 1, 2019, Luke paid LinkedIn $1,200 for his 2-year subscription for online professional networking.   The subscription starts immediately.   What amount of revenue should LinkedIn record for the years of 2019 and 2020?

A. Year 2019 = $1,200; Year 2020 = $0

B. Year 2019 = $600, Year 2020 = $600

C. Year 2019 = $400; Year 2020 = $600

D. The answer cannot be determined based on the information given

Homework Answers

Answer #1

C) Year 2019= $ 400 , year 2020 = $ 600 is correct alternative

Explanation :

As per accrual basis of accounting, revenues can be recorded only when service has been rendered . Cash received or not it is totally immaterial to record revenue.

Journal entry for 2019

Date Account titles Debit Credit
May 1,2019 Cash $ 1,200
Unearned revenue $ 1,200
December 31, 2019 Unearned revenue $ 400
Service revenue [ $ 1,200/ 24] X 8 $ 400
( Service revenue recorded for 8 months of service rendering from may 19 to December 19)

Journal entry for 2020

Date Account titles Debit Credit
December 31,2020 Unearned revenue $ 600
Service revenue ( $ 1,200/ 24) X 12 $ 600
( Service revenue recorded for the period of 12 months ( 1/1/20 to 31/12/20)
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