Subscription Revenue of Walter - Essay Example

Accounting 110 a) Entry in November 2007 During 2007 Walter has sold 6000 subscriptions beginning with the December issue. That means the subscription is for the period from December 2007 to November 2008 issues. Assuming the cost of each subscription is ₤10 for one year. Then the subscription received in advance for December 2007 is ₤5000 and for the period from January 2008 to November 2008 is₤55000. Accordingly in November 2007, the following journal entry will be passed Dr CrCash 60000 Advance Subscription (2007) 5000 Advance Subscription (2008) 55000 It may be noted that at the year ending December 2007, the subscription earned will be ₤5000 only with regard to this November 2007 transaction. b) Adjusting Entry in December 2008 for revenue earned in December 2007Passing an adjustment entry on December 31, 2008, for revenue earned in 2007 means revenue for 2007 was not recognized in December 2007 and it was wrongly treated as ‘unearned subscription revenue’.

It may be noted that the revenue considered here is of subscriptions received in November 2007 and not for the entire year of 2007. Accordingly, the adjusting entry on December 31, 2008, to record subscriptions earned in December 2007 will be as under: Dr. Cr Unearned Subscription Revenue 5000Retained Earnings (Subscription Revenue) 5000c) Adjusting Entry at March 31, 2008, For the quarter ending the unearned subscription revenue will for the quarter ending with March 31, 2008. Accordingly, the journal entry to be passed on March 31, 2008, will be as under: Dr. Cr.

Advance Subscription (2008) 20000 Unearned Subscription Revenue 20000It may be noted that entry for subscription earned will be passed only after November 30, 2008.