The publishers of 'Guide to the Stock Market', a magazine published monthly, received $121 in advance, including $11 GST on 1 March, for a 1 year's subscription (11 issues) beginning with the March issue. On receipt of the subscription which entry will the company make?
A) DR Cash $121; CR Subscriptions income $121
B) DR Cash $121; CR GST collections $11, CR Unearned subscriptions (liability) $110
C) DR Cash $121; CR GST collections $11, CR Subscriptions received in advance (asset) $110
D) DR Cash $110; CR Subscriptions income $110

Question

Quizplus · Accepted Answer

The company received $121 in advance, including $11 GST, for a 1 year's subscription. This subscription is for 11 issues, beginning with the March issue. Therefore, the company has to recognize the $11 GST as a liability and the remaining $110 as unearned subscriptions revenue (liability) because the company has not yet delivered the magazines to the subscribers. Hence, the correct entry will be DR Cash $121; CR GST collections $11, CR Unearned subscriptions (liability) $110.

The Publishers of 'Guide to the Stock Market', a Magazine