A company has advance subscription sales totaling $45,000 for four quarterly journals that will mailed to customers in the upcoming year. When the company mails the first quarterly journal to customers, it should record:
A)Debit Prepaid Subscriptions $33,750; credit Unearned Revenue $33,750.
B)Debit Unearned Revenue $45,000; credit Cash $45,000.
C)Debit Cash $11,250, credit Sales $11,250.
D)Debit Unearned Revenue $11,250, credit Sales $11,250.
E)Debit Prepaid Subscriptions $11,250, credit Sales $11,250.

Question

Quizplus · Accepted Answer

The company should recognize revenue for the portion of the subscription that has been earned. Since one out of four journals has been delivered, $11,250 of the $45,000 unearned revenue should be recognized as earned revenue.

A Company Has Advance Subscription Sales Totaling $45,000 for Four