Fill This Form To Receive Instant Help
Fill This Form To Receive Instant Help
Homework answers / question archive / Reader's Digest Association is a publisher of magazines, books, and music collections
Reader's Digest Association is a publisher of magazines, books, and music collections. The following note is from a recent annual report:
Revenues:
Sales of our magazine subscriptions are deferred (as unearned revenue) and recognized as revenues proportionately over the subscription period.
Assume that Reader's Digest (a) collected $420 million in 2012 for magazines that will be delivered later in 2012 and 2013, and (b) delivered $204 million worth of magazines on these subscriptions in 2012.
Required:
1. Using the information given, indicate the accounts, amounts, and accounting equation effects (+ for increase, - for decrease) of transactions (a) and (b).
2. Using the information given, prepare the journal entries that would be recorded in 2012 and 2013.
1.
a.
Cash (Asset) increases by $420 million & Deferred revenue (Liabilities) increases by $420 million.
b.
i.
In 2012, Revenue (Revenue account) increases by $204 million & Deferred Revenue (Liabilities) decreases by $204 million.
ii.
Revenue increase = 420 million - 204 million
Revenue increase = $216 million
In 2013, Revenue (Revenue account) increases by $216 million & Deferred revenue (Liabilities) decreases by $216 million.
2.
a.
| Particulars | Debit ($) | Credit ($) |
|---|---|---|
| Cash | 420,000,000 | |
| Deferred revenue | 420,000,000 |
b.
For 2012:
| Particulars | Debit ($) | Credit ($) |
|---|---|---|
| Deferred revenue | 204,000,000 | |
| Revenue | 204,000,000 |
c.
For 2013:
| Particulars | Debit ($) | Credit ($) |
|---|---|---|
| Deferred revenue | 216,000,000 | |
| Revenue | 216,000,000 |
