Healthy Living,a diet magazine,collected $492,000 in subscription revenue on 31 May.Healthy Living earns a minimum of $369,000 from the buyers who are not the subscribers.Each subscriber will receive an issue of the magazine for each of the next 12 months,beginning with the June issue.The company uses the accrual method of accounting.What is the balance in the Unearned revenue account on 31 December?

Question

Quizplus · Accepted Answer

From May to December, there are 7 months (June - December) where subscription revenue has been earned but the magazines have not yet been delivered. Therefore, the unearned revenue at the end of the year can be calculated as follows:

Subscription revenue earned from May to December = ($492,000/12) x 7 = $287,000

Since the minimum revenue expected from non-subscribers is $369,000, this means that the unearned revenue account cannot have a balance higher than $369,000. Therefore, the only possible option is C) $205,000, which is less than $369,000.

Healthy Living,a Diet Magazine,collected $492,000 in Subscription Revenue on 31