If $42,000 is collected in advance on November 1 for 6-month magazine subscriptions, what amount of subscription revenue is earned by December 31?<\/p>\n\n\n\n
The correct answer and explanation is :<\/strong><\/mark><\/p>\n\n\n\n Correct Answer:<\/strong> Explanation:<\/strong><\/p>\n\n\n\n When a company collects money in advance for services or products it has not yet delivered, this money is recorded as unearned revenue<\/strong>, a liability on the balance sheet. As the company delivers the product or service over time, it gradually earns<\/strong> the revenue and transfers it to the income statement under subscription revenue<\/strong>.<\/p>\n\n\n\n Let\u2019s break down the scenario:<\/p>\n\n\n\n We want to calculate how much revenue has been earned by December 31<\/strong>.<\/p>\n\n\n\n Since \\$42,000 covers 6 months, divide it equally across the 6 months:<\/p>\n\n\n\n $$ $$ This accurately reflects the matching principle in accrual accounting\u2014revenue is recognized when earned, not when received.<\/p>\n","protected":false},"excerpt":{"rendered":" If $42,000 is collected in advance on November 1 for 6-month magazine subscriptions, what amount of subscription revenue is earned by December 31? The correct answer and explanation is : Correct Answer:\\$14,000 Explanation: When a company collects money in advance for services or products it has not yet delivered, this money is recorded as unearned […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-210967","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/210967","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=210967"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/210967\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=210967"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=210967"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=210967"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\\$14,000<\/strong><\/p>\n\n\n\n
\n\n\n\nStep 1: Understand the time frame.<\/h3>\n\n\n\n
\n
November 1 to April 30.<\/strong><\/li>\n<\/ul>\n\n\n\nStep 2: Determine the monthly revenue.<\/h3>\n\n\n\n
\\frac{\\$42,000}{6 \\text{ months}} = \\$7,000 \\text{ per month}
$$<\/p>\n\n\n\nStep 3: Count the number of months earned by December 31.<\/h3>\n\n\n\n
\n
\\$7,000 \\times 2 = \\$14,000
$$<\/p>\n\n\n\nStep 4: Interpret the result.<\/h3>\n\n\n\n
\n
Accounting Impact:<\/h3>\n\n\n\n
\n