Question

In its 2021 annual report to shareholders, Ank-Morpork Times Inc. included the following disclosure: Revenue Recognition • Advertising revenue is recognized when advertisements are published, are broadcast, or when placed on the Company's websites, net of provisions for estimated rebates, credit and rate adjustments and discounts. Circulation revenue includes single copy and home-delivery subscription revenue. Single copy revenue is recognized based on date of publication, net of provisions for related returns. Proceeds from home-delivery subscriptions and related costs, principally agency commissions, are deferred at the time of sale and are recognized in earnings on a pro rata basis over the terms of the subscriptions. • Other revenue is recognized when the related service or product has been delivered. Also, the following information on its current liabilities was included in its comparative balance sheets: CURRENT LIABILITIES Commercial paper outstanding Accounts payable Accrued payroll and other related liabilities Accrued expenses Accrued income taxes Deferred subscription revenue Current portion of long-term debt and lease obligations Total current liabilities 2021 2020 $152,300,000 $285, 251,000 $164,950,000 $168,552,000 $ 75,299,000 $120,983,000 $154,867,000 $184,748,000 $219, 220,000 $ 9,792,000 $ 55, 706,000 $ 75,385,000 $ 2,474,000 $ 2,539,000 $824,816,000 $847,250,000 Required: Assuming that Ank-Morpork Times Inc. collected $434,000,000 in cash for home-delivery subscriptions during fiscal year 2021, what amount of revenue did it recognize during 2021 from this source? Show the relevant T-account information to support your answer.

Answer 1

Revenue earned = beginning balance of unexpired subscribtions                                   Add: cash collections                                  Less: closing balance of unexpired subscriptions Thus revenue earned = $75,385,000+ $434,000,000- $55,706,000 Revenue recognised = $453,679,000. Beginning balance $75,385,000            Add: Cash Collected $434,000,000 Less: Closing balance $55,706,000 Revenue Recognises $453,679,000.