Question

Complete the paragraph to explain why unearned revenues are liabilities instead of revenues. In the explanation, use the following actual example: The New York Times , a national newspaper, collects cash from subscribers in advance and later provides news content via print newspapers and online access to subscribers over a one-year period. Explain what happens to the unearned revenue over the course of a year as The New York Times delivers papers and online content to subscribers. Into what account does the earned subscription revenue go as The New York Times delivers papers and online content? Give the journal entries that The New York Times would make to (a) collect $ 50 comma 000 of subscription revenue in advance and (b) record earning $ 40 comma 000 of subscription revenue. Include an explanation for each entry.

Explain what happens to the unearned revenue over the course of a year as The New York Times delivers papers and online content to subscribers. Unearned revenues are liabilities because The New York Times has "choose one:" (ESTABLISHED AN ACCOUNTS PAYABLE FOR) or (RECEIVED CASH FROM) subscribers (BEFORE) or (AFTER) providing them with newspapers and online access.

Into what account does the earned subscription revenue go as The New York Times delivers papers and online content?

As The New York Times delivers newspapers to subscribers, The New York Times earns the revenue, and that amount then Choose one: (GETS EXPENSED TO THE DELIVERY EXPENSE ACCOUNT) or (GOES FROM THE REVENUE ACCOUNT TO THE UNEARNED REVENUE ACCOUNT.) or (GOES FROM THE UNEARNED REVENUE ACCOUNT TO THE REVENUE ACCOUNT)

Give the journal entries that The New York Times would make to​ (a) collect $ 50 comma 000 of subscription revenue in advance and​ (b) record earning $ 40 comma 000 of subscription revenue. Include an explanation for each entry. ​(Record debits​ first, then credits. Select the explanation on the last line of the journal entry​ table.)

(a) Begin by recording the entry to show The New York Times collecting subscription revenue in advance Journal Entry Date Accounts and Explanations Debit Credit

Answer 1

Ans: The New York Times,

Unearned revenue is shown as liability instead of revenue, This is because this amount is received is advance from the customer as against the services that will be provided in future so the amount will be credited in the debtors account and when the services is provided than Debtor's A/c will be debited. For Example: Mr A paid $1000 for the services to be provided over next to two months then,

Cash A/c    Dr.    $1,000

To Unearned revenue A/c $1,000

(being advance received from Mr. A for services to be provided after two Months)

After one Months

Unearned revenue A/c Dr. $500

   To Revenue A/c    $500

(being revenue recognized for the 1st month)

After Two Months

Unearned revenue A/c Dr. $500

   To Revenue A/c    $500

(being revenue recognized for the 2nd month)

Date	Particulars	Dr. ($)	Cr. ($)
	Cash A/c Dr. To Unearned Revenue A/c (being entry for the amount received in advance for the services to be performed Revenue Unearned.This because the New York Times received cash from subscriber before providing them with newspapers and online access)	50,000	50,000
	Unearned Revenue A/c Dr.    To Revenue A/c (being services provided for the amount received in advance)	40,000	40,000