Pickett Company typically sells subscriptions on an annual basis and publishes six times a year.The magazine sells 90,000 subscriptions in January at $15 each.What entry is made in January to record the sale of the subscriptions?

Question

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The entry to record the sale of subscriptions will be:

January 1
Cash                        $1,350,000
  Unearned Subscription Revenue        $1,350,000

This is because the company has received the cash for the subscriptions but has not yet earned it since the magazine will be published six times throughout the year. The $1,350,000 is calculated as follows:

90,000 subscriptions sold x $15 per subscription = $1,350,000.

Option A is incorrect because it only records the cash received but doesn't properly reflect the liability for unearned revenue.

Option C is incorrect because it only records the revenue but doesn't reflect the fact that it is unearned at this time.

Option D is incorrect because it doesn't properly record the revenue as unearned and also includes an unnecessary expense account.

Pickett Company Typically Sells Subscriptions on an Annual Basis and Publishes