Question

b. Caden started a new publication called Contest News. Its subscribers pay $24 to receive 12 monthly issues. With every new subscriber, Caden debits Cash and credits Unearned Subscription Revenue for the amounts received. The company has 100 new subscribers as of July 1. It sends Contest News to each of these subscribers every month from July through December. Assume no changes in subscribers, prepare the year-end journal entry that Caden must make as of December 31 to adjust the Subscription Revenue account and the Unearned Subscription Revenue account. Unearned subscription revenue Step 1: Determine what the current account balance equals. Step 2: Determine what the current account balance should equal Step 3: Record the December 31 adjusting entry to get from step 1 to step 2

Answer 1

In the books of contest news.

Journal Book

Date	Particulars	Debit	Credit
July 1	Bank a/c Dr To Unearned Revenue a/c(100sub×$24) (Being money received for subscription from new subscribers)	$2400	$2400

On december 31, before adjustment the total amount in Subscription Revenue account will be ($2400÷12)*5m=$1000 and Unearned Revenue account will show $1400.

But in reality as on 31 dec,

The subscription Revenue must show $(2400÷12)×6=$1200

And Unearned revue must have $1200 balance

So, the entry would be as follows.

Date	Particulars	Debit	Credit
31 Dec	Unearned Revenue a/c Dr To Subscription Revenue a/c	$200	$200