Madson Company typically sells subscriptions on an annual basis, and publishes s

Question

Madson Company typically sells subscriptions on an annual basis, and publishes six times a year. The magazine sells 60,000 subscriptions in January at $10 each. What entry is made in January to record the sale of the subscriptions?

Question 8 options:

Prepaid Subscriptions................600,000

..................Cash...................................600,000

Subscriptions Receivable..........600,000

................Subscription Revenue.............600,000

Cash...........................600,000

............Unearned Subscription Revenue.....600,000

Subscriptions Receivable.............100,000

.............Unearned Subscription Revenue....100,000

Prepaid Subscriptions................600,000

..................Cash...................................600,000

Subscriptions Receivable..........600,000

................Subscription Revenue.............600,000

Cash...........................600,000

............Unearned Subscription Revenue.....600,000

Subscriptions Receivable.............100,000

.............Unearned Subscription Revenue....100,000

Explanation / Answer

Solution:

Since company typically sells subscriptions on an annual basis, it uses to record the subscription on due basis. When it will due the company will record the subscription as revenue.

Hence the correct entry to record the sale of the subscriptions is

Cash...........................600,000

............Unearned Subscription Revenue.....600,000

Because when company sells subscription, they will receive the CASH and they will book this amount as Unearned Subscription Revenue because Revenue is booked only on when company published the same.

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