Question

Sheridan Company Ltd. publishes a monthly sports magazine, Fishing Preview. Subscriptions to the magazine cost $28 per year. During November 2022, Sheridan sells 10,500 subscriptions for cash, beginning with the December issue. Sheridan 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.

Required:
Prepare the entry in November for the receipt of the subscriptions.

Answer 1

Answer and Explanation:

The journal entry to record the receipt of the subscription is as follows:

Cash ($28 × 10,500) $294,000

         To Unearned Subscription Revenue $294,000

(being the  receipt of the subscription is recorded)

Here the cash is debited as it increased the assets and credited the unearned subscription revenue as it also increased the revenue