Healthy Living, a diet magazine, collected $480,000 in subscription revenue on May 31. Healthy Living earns a minimum of $351,000 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 December 31?
A)$200,000
B)$280,000
C)$480,000
D)$351,000

Question

Quizplus · Accepted Answer

Unearned Revenue = Subscription Revenue - Revenue EarnedRevenue Earned = Subscription Revenue / Number of MonthsRevenue Earned = $480,000 / 12 = $40,000 per monthUnearned Revenue = $480,000 - ($40,000 * 7) = $200,000

Healthy Living, a Diet Magazine, Collected $480,000 in Subscription Revenue