Rutherford Co. started a new publication called Contest News. Its subscribers pa

Question

Rutherford Co. started a new publication called Contest News. Its subscribers pay $48 to receive 12 issues. With every new subscriber, Rutherford debits Cash and credits Unearned Subscription Revenue for the amounts received. The company has 100 new subscribers as of July 1, 2011. It sends Contest News to each of these subscribers every month from July through December. Assuming no changes in subscribers, prepare the journal entry that Rutherford must make as of December 31, 2011, to adjust the Subscription Revenue account and the Unearned Subscription Revenue account.

Explanation / Answer

Gets 100 new subscribers @ $48 each in July = $48 x 100 = $4,800 DEBIT: Cash 4,800 CREDIT: Unerarned Subscription Account: (4,800) July to December is 6 months --------------------------------------… 100 new subscribers in July Cost of magazine is $48 divided by 12 = £4 per issue 100 magazines x $4 each x 6 months = $2,400 Now lets remember that we have to omit the $ sign in our answer on its effect on the Cash and Unearned subscription account. DEBIT: Unearned subscription account - 2,400 CREDIT Cash account - 2,400

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