If a company has advance subscription sales totaling $45,000 for the upcoming year when four quarterly journals will mailed to customers,the receipt of cash would be journalized as:
A)Debit Cash $45,000;credit Unearned Revenue $45,000.
B)Debit Unearned Revenue $45,000;credit Sales $45,000.
C)Debit Cash $45,000,credit Sales $45,000.
D)Debit Sales $45,000,credit Unearned Revenue $45,000.
E)Debit Prepaid Subscriptions $45,000,credit Sales $45,000.

Question

Quizplus · Accepted Answer

The advance subscription sales represent unearned revenue, which is a liability account. Therefore, we debit Cash (an asset account) for the $45,000 received and credit Unearned Revenue (a liability account) for the same amount. Option B is incorrect because Sales should be debited only when services are actually provided (at the time of mailing the quarterly journals). Option C is incorrect because the company has not yet recognized revenue for the upcoming year. Option D is incorrect because we credit Sales only when revenue is earned. Option E is incorrect because Prepaid Subscriptions is an asset account and not applicable in this scenario.

If a Company Has Advance Subscription Sales Totaling $45,000 for the Upcoming