Question

Required 1. Complete the paragraph explaining why unearmed reverues are liablities instead of revenues. In the explanation, use the folowing actual example: Maclean's magazine colects cash from subscribers in advance and later delivers magazines to svbscribers over a one-year peried. Explain what happers to the uneamed subsoription revenue over the course of a year as Maclean's delvers magazines to subscribers. Into what accoust does the uneamed subscriotion revenue go as Mackan's delivers magazines? 2. Give the jourmal entries that Maclean's would make to: a. Colect $41.000 of subsoription revenue in advance b. Record earming S14,000 of subsorption revenue Include an explanation for each entry Requirement 1. Complete the paragraph explaining why uneamed revenues are labities instead of revenues In the explanaton, use the folowing actual example Maclean's magarne collects cash from subecriters in advance and later delivers magazines to subscribers over a one year period. Explain what happens to the unearmed subsoioticn revenue over the course of a year as Macan's delivers magazines to subscribers. Into what account does the uneamed subsoriction revenue go as Maclean's delivers magaines? Uneamed revenues are labities because Aaclean's has ubscribers Mackean's delivers magazines to subscrbers, Maclean's eams the revenue, and the dollar amount of the Vproviding then wih magaines Receiving the cash in advance creates revenue is tranaferred from for Maciean's As revanue to revenue.

Answer 1

1.) Unearned revenue are liabilities because Maclean's has received cash from subscribers before providing them with magazine. Receiving the cash in advance creates an obligation for Maclean's. As Maclean's delivers magazine to subscriber. Maclean's earns the revenue, and the dollar amount of the earned revenue is transferred from unearned revenue to earned revenue.

2.) Journal entry :-

Accounts and Explanation	Debit	Credit
Cash	$41,000
Unearned revenue		$41,000
(To record subscription received in advance)
Unearned revenue	$14,000
Revenue		$14,000
(To record Revenue earned)