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Chapter 3: Q.3SE-a (page 158)

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.

Short Answer

Expert verified

Answer

The company should recognize the revenue after each successive issue to the customers.

Step by step solution

01

Explanation of Revenue Recognition Principle

Per the revenue recognition principle, revenue should be recorded when the goods or services are provided to the customers.

02

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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Most popular questions from this chapter

What are the two basic categories of adjusting entries? Provide two examples of each.

Question :The accounting records of Mackay Architects include the following selected, unadjusted balances at March 31: Accounts Receivable, \(1,500; Office Supplies, \)700; Prepaid Rent, \(2,240; Equipment, \)8,000; Accumulated Depreciation—Equipment, \(0; Salaries Payable, \)0; Unearned Revenue, \(900; Service Revenue, \)4,100; Salaries Expense, \(800; Supplies Expense, \)0; Rent Expense, \(0; Depreciation Expense—Equipment, \)0. The data developed for the March 31 adjusting entries are as follows: a. Service revenue accrued, \(700. b. Unearned revenue that has been earned, \)100. c. Office Supplies on hand, \(300. d. Salaries owed to employees, \)200. e. One month of prepaid rent has expired, \(560. f. Depreciation on equipment, \)120. Requirements 1. Open a T-account for each account using the unadjusted balances given. 2. Journalize the adjusting entries using the letter and March 31 date in the date column. 3. Post the adjustments to the T-accounts, entering each adjustment by letter. Show each account’s adjusted balance.

Iron Horse Printing Services purchased \(1,000 of printing supplies for cash, recording the transaction using the alternative treatment for deferred expenses. At the end of the year, Iron Horse had \)300 of printing supplies remaining. Record the journal entry for the purchase of printing supplies and the adjusting entry for printing supplies not used.

Question: Hooten Carpentry had the following accounts and account balances after adjusting entries. Assume all accounts have normal balances. Prepare the adjusted trial balance for Hooten Carpentry as of December 31, 2018. Cash \( 4,025 Common Stock \) ? Land 5,000 Accounts Receivable 660 Utilities Expense 400 Office Supplies 120 Accounts Payable 225 Utilities Payable 210 Accumulated Depreciation—Equipment 1,000 Service Revenue 12,000 Salaries Expense 550 Unearned Revenue 300 Supplies Expense 80 Depreciation Expense—Equipment 800 Equipment 10,000 Dividends 500.

What is an accrued revenue? Provide an example

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