Q 9SE-3 - 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

T-accounts are as follows:

Unearned Subscription Revenue
	8,000	180,000
		172,000	Bal.

 

Subscription Revenue
		8,000
		8,000	Bal.

 

Step-by-Step Solution Step 1: Definition on T-account

T-account refers to the representation of account in T format, which is used to post the journal entries.

Step 2: Explanation on T-account

The balance of subscription revenue account equals $8,000 and unearned subscription revenue account equals $172,000.