Suppose that a business sells 6-month subscriptions to its monthly magazine. On January 1, the company receives a total of $600 for 10 subscriptions. To record this transaction, the company debits "Cash" for $600 and credits "Unearned Subscription Revenue" for $600. As of January 31, the company has provided one month of magazines and has earned one month of revenue. What adjusting entry is necessary at January 31?

Question

Quizplus · Accepted Answer

At January 31, the company has earned one month of revenue but still has five months of unearned revenue remaining. Therefore, $100 of the initial $600 received should be recognized as revenue and moved from "Unearned Subscription Revenue" to "Subscription Revenue" through the adjusting entry of debiting "Unearned Subscription Revenue" and crediting "Subscription Revenue" for $100.

Suppose That a Business Sells 6-Month Subscriptions to Its Monthly