On September 1, 2013, Fortune Magazine sold 600 one-year subscriptions for $81 each. The total amount received was credited to unearned subscriptions revenue. What is the required adjusting entry at December 31, 2013?

Question

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At December 31, 2013, four months have passed since the subscriptions were sold (September to December). Therefore, there is $54 (4/12 x $81 x 600) of earned subscriptions revenue that must be recognized. The adjusting entry will be a debit to unearned subscriptions revenue for $54 and a credit to subscriptions revenue for $54. Choice B reflects this adjusting entry.

On September 1, 2013, Fortune Magazine Sold 600 One-Year Subscriptions