On March 31, Phoenix, Inc. paid Melanie Publishing Company $15,480 for a 3-year subscription for five different magazines. The subscriptions started immediately. What is the amount of revenue that should be recorded by Melanie Publishing Company for each year of the subscription assuming Melanie uses a calendar reporting period?
A) $15,480; $0; $0; $0.
B) $5,160; $5,160; $5,160.
C) $3,870; $5,160; $5,160; $1,290.
D) $0; $0; $0; $15,480.
E) The answer cannot be determined based on the information given.

Question

Quizplus · Accepted Answer

The amount of revenue that should be recorded each year is calculated as follows:
Year 1: $15,480 ÷ 3 = $5,160
Year 2: $5,160 + $5,160 = $10,320 total revenue received over first two years. $15,480 - $10,320 = $5,160 in revenue to be recorded in Year 2.
Year 3: $5,160 + $5,160 = $10,320 total revenue received over first three years. $15,480 - $10,320 = $5,160. However, the subscription is only for three years, so the remaining $5,160 is allocated entirely to Year 3.
Therefore, the revenue recorded for Year 1 is $5,160, for Year 2 is $5,160, for Year 3 is $5,160 + $1,290 (remaining balance) = $6,450.