A company receives $360 for a 12-month trade magazine subscription on August 1. The adjusting entry on December 31 is a debit to Unearned Subscription Revenue of $150 and a credit to Subscription Revenue of $150.

Question

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This is the correct adjusting entry for a 12-month subscription received on August 1. By December 31, four months (or 1/3) of the subscription period have elapsed, so $120 of the subscription revenue can be recognized as earned while the remaining $240 still needs to be recorded as unearned. The adjusting entry debits the unearned subscription revenue account for $150 (the remaining amount still unearned) and credits the subscription revenue account for $150 (the amount earned so far).

A Company Receives $360 for a 12-Month Trade Magazine Subscription