Question

Question 1

Time Traveler Magazine completed the following transactions during 2016:

•     Oct 31: Sold one-year subscriptions, collecting cash of $1,750, plus HST of 13%.
•     Dec 31: Remitted (paid) HST to Canada Revenue Agency (CRA).
•     Dec 31: Made the necessary adjustment at year-end.

1.    Journalize these transactions and then report any liability on the company’s balance sheet at

December 31st.

Answer 1

Answer:

Credit Debit $ 1,978 $ $ 1,750 228 Date Accounting title and explanations Oct-31 Cash Unearned revenue HST payable [ $1,750 x 13%] (to record one year subscription received) Dec-31 HST payable ($ 1,750 x 13%] Cash (to record HST paid) Dec-31 Unearned revenue [ $1,750 x 2/12] Subscription revenue (to record subscription revenue earned) $ 228 $ 228 $ 292 $ 292 Notes: Subscription received on October 31 of $1750 for one year, however only two months (November and December) subscription revenue should recognize in the books for the current period. Remaining period is in next accounting period and hence it should be carried forward to next year. Liability on the company's balance sheet at December 31st is $ 1,458 [$ 1750 - $ 292] as Unearned revenue