In November and December 2014, Lane Co., a newly organized magazine publisher, received $60,000 for 1,000 three-year subscriptions at $20 per year, starting with the January 2015 issue. Lane included the entire $60,000 in its 2014 income tax return. What amount should Lane report in its 2014 income statement for subscriptions revenue?

Question

Quizplus · Accepted Answer

Lane should report $0 in its 2014 income statement for subscriptions revenue because the revenue recognition principle requires that revenue be recognized when it is earned, not when cash is received. Since the subscriptions start in January 2015, no revenue is earned in 2014.