Why Choose Us?
0% AI Guarantee
Human-written only.
24/7 Support
Anytime, anywhere.
Plagiarism Free
100% Original.
Expert Tutors
Masters & PhDs.
100% Confidential
Your privacy matters.
On-Time Delivery
Never miss a deadline.
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.
Expert Solution
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 |
Archived Solution
You have full access to this solution. To save a copy with all formatting and attachments, use the button below.
For ready-to-submit work, please order a fresh solution below.
