Pickett Company typically sells subscriptions on an annual basis, and publishes six times a year. The magazine sells 90,000 subscriptions in January at $15 each. What entry is made in January to record the sale of the subscriptions?
A) Subscriptions Receivable 1,350,000 Subscription Revenue 1,350,000
B) Cash 1,350,000 Unearned Subscription Revenue 1,350,000
C) Subscriptions Receivable 225,000 Unearned Subscription Revenue 225,000
D) Prepaid Subscriptions 1,350,000 Cash 1,350,000

Question

Quizplus · Accepted Answer

The sale of the subscriptions results in Unearned Subscription Revenue (a liability account) because the company has not yet delivered the magazines to the customers. Cash is also received, which is recorded as an asset. Therefore, the correct entry is to debit Cash and credit Unearned Subscription Revenue. The amount to be credited is the total amount received ($15 x 90,000 = $1,350,000).

Pickett Company Typically Sells Subscriptions on an Annual Basis, and Publishes