The Boaters News magazine sold five-year subscriptions during the year totalling $75 000. Assume that all subscriptions were effective from 1 January and that the calendar year is the accounting period. At 31 December, in addition to the cash which of the following should be reported on Boaters News' financial statements?
A) Revenue of $75 000 and an asset of $75 000
B) Revenue of $15 000 and equity of $60 000
C) Revenue of $15 000 and liabilities of $60 000
D) Revenue of $15 000 and an asset of $60 000

Question

Quizplus · Accepted Answer

Revenue for the year should be recognized proportionally, so $15,000 for the first year out of a five-year subscription. The remaining $60,000 is unearned and should be reported as a liability (deferred revenue) until it is earned in subsequent years.

The Boaters News Magazine Sold Five-Year Subscriptions During the Year