A company has advance subscription sales totaling $45,000 for the upcoming year when four quarterly journals will mailed to customers.When the company mails the first quarterly journal to customers,it should record:
A)Debit Prepaid Subscriptions $33,750;credit Unearned Revenue $33,750.
B)Debit Unearned Revenue $45,000;credit Cash $45,000.
C)Debit Cash $11,250,credit Sales $11,250.
D)Debit Unearned Revenue $11,250,credit Sales $11,250.
E)Debit Prepaid Subscriptions $11,250,credit Sales $11,250.

Question

Quizplus · Accepted Answer

The company should recognize revenue for the portion of the subscription that has been earned. Since one out of four journals has been delivered, 1/4 of the total subscription amount ($45,000) should be recognized as revenue. Therefore, $11,250 should be debited from Unearned Revenue and credited to Sales.

A Company Has Advance Subscription Sales Totaling $45,000 for the Upcoming