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. At the end of the financial year on 30 June what entry will the company make?

Question

Quizplus · Accepted Answer

DA: The correct entry involves recognizing the income earned from the subscriptions that have been delivered up to the end of the financial year. Since the subscription is for 11 months and 4 months have passed (March to June), the portion of the subscription revenue that has been earned needs to be moved from a liability (unearned subscriptions) to income (subscriptions income).D: This option correctly accounts for the GST portion of the earned subscription revenue. Given that the total subscription includes GST, the portion of the revenue recognized must also account for the GST collected on the earned income. This entry accurately reflects the separation of the earned income and the GST liability that has been settled by delivering the magazines.

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