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Chapter 13: Question 4BE (page 692)

BE13-4 (L01) Sport Pro Magazine sold 12,000 annual subscriptions on August 1, 2017, for $18 each. Prepare Sport Pro’s August 1, 2017, journal entry and the December 31, 2017, annual adjusting entry, assuming the magazines are published and delivered monthly.

Short Answer

Expert verified

The amount of subscription revenue is $90,000.

Step by step solution

01

Meaning of Subscription

The subscription is the amount of money paid by a subscriber to any entity, institute, or club to remain effective in its membership over the period. It is income for receiving entity.

02

Journal Entries

Date

Accounts and Explanation

Debit $

Credit $

August 1, 2017

Cash

$216,000

Unearned Subscription Revenue (12,000 x $18)

$216,000

December 31, 2017

Unearned Subscription Revenue

$90,000

Subscription Revenue ($216,000 x 5/12)

$90,000

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Most popular questions from this chapter

(Gain on Sale of Investments and Comprehensive Income) On January 1, 2017, Acker Inc. had the followingbalance sheet.

The accumulated other comprehensive income related to unrealized holding gains on available-for-sale debt securities. The fairvalue of Acker Inc.’s available-for-sale debt securities at December 31, 2017, was \(190,000; its cost was \)140,000. No securities

were purchased during the year. Acker Inc.’s income statement for 2017 was as follows. (Ignore income taxes.)

ACKER INC.

BALANCE SHEET

AS OF JANUARY 1, 2017

Assets Equity

Cash \( 50,000 Common stock \)260,000

Debt investments (available-for-sale) 240,000 Accumulated other comprehensive income 30,000

Total \(290,000 Total \)290,000

ACKER INC.

INCOME STATEMENT

FOR THE YEAR ENDED DECEMBER 31, 2017

Dividend revenue \( 5,000

Gain on sale of investments 30,000

Net income \)35,000

Instructions

(Assume all transactions during the year were for cash.)

(a) Prepare the journal entry to record the sale of the available-for-sale debt securities in 2017.

(b) Prepare the journal entry to record the Unrealized Holding Gain or Loss for 2017.

(c) Prepare a statement of comprehensive income for 2017.

(d) Prepare a balance sheet as of December 31, 2017.

(Multiple-Step and Single-Step Statements) Two accountants for the firm of Elwes and Wright are arguing about the merits of presenting an income statement in a multiple-step versus a single-step format. The discussion involves the following 2017 information related to P. Bride Company (\(000 omitted).

Administrative expense

Officers’ salaries \)4,900

Depreciation of office furniture and equipment \(3,960

Cost of goods sold \)60,570

Rent revenue \(17,230

Selling expense

Delivery expense \)2,690

Sales commissions \(7,980

Depreciation of sales equipment \)6,480

Sales revenue \(96,500

Income tax \)9,070

Interest expense $1,860

Instructions

  1. Prepare an income statement for the year 2017 using the multiple-step form. Common shares outstanding for 2017 total 40,550 (000 omitted).
  2. Prepare an income statement for the year 2017 using the single-step form.
  3. Which one do you prefer? Discuss.

Question: Amsterdam Company uses a periodic inventory system. For April, when the company sold 600 units, the following information is available.

Units Unit Cost Total Cost

April 1 inventory 250 \(10 \) 2,500

April 15 purchase 400 12 4,800

April 23 purchase 350 13 4,550

1,000 $11,850

Compute the April 30 inventory and the April cost of goods sold using the average-cost method.

Question: In determining the amount of a provision, a company using IFRS should generally measure:

(a) Using the midpoint of the range between the lowest possible loss and the highest possible loss.

(b) Using the minimum amount of the loss in the range.

(c) Using the best estimate of the amount of the loss expected to occur.

(d) Using the maximum amount of the loss in the range.


Question: 13-17 (L04) (Ratio Computations and Discussion) Sprague Company has been operating for several years, and on December 31, 2017, presented the following balance sheet.

SPRAGUE COMPANY
BALANCE SHEET
DECEMBER 31, 2017

Cash

\(40,000

Accounts payable

\)80,0000

Receivables

\(75,0000

Mortgage payable

\)140,000

Inventory

\(95,000

Common stock (\)1 par)

\(150,000

Plant assets (net)

\)220,000

Retained earnings

\(60,000

\)430,000

\(430,000

The net income for 2017 was \)25,000. Assume that total assets are the same in 2016 and 2017.

Instructions

Compute each of the following ratios. For each of the four, indicate how it is computed and its significance as a tool in the analysis of the financial soundness of the company.

(a) Current ratio. (C) Debt to assets ratio.

(b) Acid-test ratio. (d) Return on assets.
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