1. (13 points) A New York City daily newspaper called \"Manhattan Today charges

Question

1. (13 points) A New York City daily newspaper called "Manhattan Today charges an annual subscription fee of $135. Customers prepay their subscriptions and receive 260 issues over the year. To attract more subscribers, the company offered new subscribers the ability to pay $130 for an annual subscription that also would include a coupon to receive a 40% discount on a one- hour ride through Central Park in a horse-drawn carriage. The list price of a carriage ride is $125 per hour. The company estimates that approximately 30% of the coupons will be redeemed. equired: a. b. How much revenue should be recognized on receipt of the $130? Prepare the journal entry at the time the $130 was received by 260 subscribers.

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1 1. No revenue to be recognised at the time of receipt of $ 130 as no services provided immediately and services against this amount will be given in future. This will be recorded as Deferred Revenue (Liability) at the time of receipt and later on, when service provided, Deferred Revenue will be reversed to the extent and revenue will be recognized 2 Journal Account Debit Credit Cash 130*260 33800 Deferred Revenue-Subscription (90% of 33800- See working below) 30420 Deferred Revenue-Discount Coupon (10% of 33800- See working below) 3380 Working: Value of coupon 125*40% discount 50 Redemption Expected 30% 15 % Weight Hence: Selling price of coupon-Standalone 15 10 Selling Price of Subscription (Normal) 135 90 Total 150

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