Q.3SE-a
Question
Question :Seacoast Magazine sells subscriptions for $36 for 18 issues. The company collects cash in advance and then mails out the magazines to subscribers each month. Apply the revenue recognition principle to determine a. when Seacoast Magazine should record revenue for this situation. b. the amount of revenue Seacoast Magazine should record for eight issues.
Step-by-Step Solution
Verified Answer
Answer
The company should recognize the revenue after each successive issue to the customers.
1Step 1: Explanation of Revenue Recognition Principle
Per the revenue recognition principle, revenue should be recorded when the goods or services are provided to the customers.
2Step 2: Explanation of Revenue Recording
Advance receipt of $36 will be recorded as unearned revenue in the account books. In this case, revenue will be recorded when a magazine is issued to the customers.
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