Magic,Inc.collected $24,000 in October 2011 from customers in exchange for 12-month subscriptions to its monthly magazine Magic Times.The October issue was the first issue of the subscription.Which statement below is true regarding the effects of collecting the cash from customers in October?

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Collecting cash from customers for subscriptions creates a liability (unearned revenue) because the revenue has not yet been earned by providing the magazines to the customers. However, at the same time, the company's cash account (an asset) increases by $24,000. Therefore, the effects of collecting the cash from customers in October are an increase in assets and liabilities, but not shareholders' equity because revenue has not yet been earned.

Magic,Inccollected $24,000 in October 2011 from Customers in Exchange for 12-Month