Question

E3-28A (similar to) Question Help In March of 2009, Bianca's Corporation, a newly developed internet game company, received $1,080,000 for 2,000 three-year subscriptions to a new online game priced at $180 per year. The subscriptions do not start until June of 2009. Fill in the following chart for each of the given years to show the amount of revenue to be recognized on the income statement and the related liability reported on the year-end balance sheet. Bianca's Corp fiscal year end is December 31. (Round your answers to the nearest whole dollar. Complete all answer boxes.) Revenue recognized during Unearned revenue at December 31 2009 2010 2011 2012

Answer 1

The company earn money of next 3 years in first year itself. The whole revenue shall be proportionately distributed in 3 years.

But in 2009 ..the subscription received by company is in march but the game service will not provide until june according to ques. Which means the game service will be start from july 2009 onward.

To book the revenue for 2009 - the revenue shall be book from the time of initial service provided. hence, the service is provide on for 6 months in 2009 i.e. july to December.

And same thing will apply in 2012 . Services provide in 2012 is only for 6 months I.e. from jan to June.

To record unearned revenue we create a liability called advance from customer and time to time as per completion of service we proportionately book the revenue.

Calculation of amount are shown below

YEAR	Revenue recognized		Unearned revenue at DEC 31
2009	$ 18000	108000/3years * 0.5 year	$ 90000	108000-18000
2010	$ 36000	108000/3Years * 1 year	$ 54000	90000 - 36000
2011	$ 36000	108000/ 3 years * 1year	$ 18000	54000 - 36000
2012	$ 18000	108000/ 3 years * 0.5 year	$ 0	18000 - 18000

Note - for better clarity further explained down below which is not as much as important for questions point of view

When we receive amount of subscription in march the entry will we

Bank a/c ...dr. $ 108000

To Advance from customer. $ 108000

On 31st dec 2009 revenue is booked and the entry is

Advance from customer a/c. ... Dr $ 18000

To Revenue from operation. $ 18000

Further , in every year this revenue booking entry is passed until the balance in advance from customer become nil in resoect of game service subscription.