On January 2,2015,AAA Publishing,Inc.received a one-year subscription for $100 to one of the magazines that it publishes.At that time,it debited cash for $100 and credited unearned revenue for $100.After all the magazines have been delivered through December 31,2015,what journal entry needs to be recorded?
A) Debit Cash for $100 and credit Unearned Revenue for $100
B) Debit Accounts Receivable for $100 and credit Subscription Revenue for $100
C) Debit Accounts Receivable for $100 and credit Unearned Revenue for $100
D) Debit Unearned Revenue for $100 and credit Subscription Revenue for $100

Question

Quizplus · Accepted Answer

The journal entry to record the earned revenue after all the magazines have been delivered would be to debit the Unearned Revenue account and credit the Subscription Revenue account for $100. This is because the initial receipt of $100 was recorded as unearned revenue and not as subscription revenue, so now that the obligation to deliver the magazines has been fulfilled, the revenue can be recognized as earned. Thus, the correct journal entry is to debit Unearned Revenue and credit Subscription Revenue for $100.