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Chapter 3: Q 9SE-3 (page 159)

: 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.)

Short Answer

Expert verified

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

01

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

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

02

Explanation on T-account

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

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Most popular questions from this chapter

Question :Consider the following situations: a. Business receives \(3,200 on January 1 for 10-month service contract for the period January 1 through October 31. b. Total salaries for all employees is \)3,600 per month. Employees are paid on the 1st and 15th of the month. c. Work performed but not yet billed to customers for the month is \(1,600. d. The company pays interest on its \)16,000, 4% note payable of $53 on the first day of each month. Assume the company records adjusting entries monthly. Journalize the adjusting entries needed as of January 31.

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Question :At the beginning of the year, Modish Advertising owed customers \(2,100 for unearned revenue collected in advance. During the year, Modish received advance cash receipts of \)6,100 and earned \(20,000 of service revenue (exclusive of any amount earned from advance payments). At year-end, the liability for unearned revenue is \)3,100 and unadjusted service revenue is $20,000. Requirements 1. Record the adjusting entry assuming that Modish records the cash receipt of unearned revenue by initially crediting a liability account. Post the adjusting entry to the Unearned Revenue and Service Revenue T-accounts. Make sure to include the beginning balance and additional unearned revenue in the Unearned Revenue T-account. 2. Record the adjusting entry assuming that Modish records the cash receipt of unearned revenue by initially crediting a revenue account. Post the adjusting entry to the Unearned Revenue and Service Revenue T-accounts. Make sure to include the beginning balance in the Unearned Revenue T-account and the additional unearned revenue in the Service Revenue T-account. 3. Compare the ending balances of the T-accounts under both approaches. Are they the same?
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