Q 9SE-1 - Horngren'S Financial And Managerial Accounting

Question

Eastside Magazine collects cash from subscribers in advance and then mails the magazines to subscribers over a one-year period. Requirements 1. Record the journal entry to record the original receipt of \(180,000 cash. 2. Record the adjusting entry that Eastside Magazine makes to record earning \)8,000 in subscription revenue that was collected in advance. 3. Using T-accounts, post the journal entry and adjusting entry to the accounts involved and show their balances after adjustments. (Ignore the Cash account.)

Step-by-Step Solution

Answer

Journal entries are as follows:

Date	Accounts and Explanation	Debit	Credit
	Cash	$180,000
	Unearned Subscription Revenue		$180,000
	To record unearned subscription revenue

Step-by-Step Solution Step 1: Explanation on Unearned Revenue

Unearned revenue refers to the advance income received by the business, in which goods or services will be provided in future.

Step 2: Explanation on Journal Entry

To record the unearned revenue, cash account is debited and unearned subscription revenue account is credited by $180,000, respectively.