{"id":220979,"date":"2025-05-29T05:13:19","date_gmt":"2025-05-29T05:13:19","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=220979"},"modified":"2025-05-29T05:13:21","modified_gmt":"2025-05-29T05:13:21","slug":"the-company-credited-unearned-revenue-for-the-amount-recelved-and-the-subscriptions-started-inmediately","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/05\/29\/the-company-credited-unearned-revenue-for-the-amount-recelved-and-the-subscriptions-started-inmediately\/","title":{"rendered":"The company credited Unearned Revenue for the amount recelved and the subscriptions started inmediately."},"content":{"rendered":"\n<p>On April 1, Garcia Publishing Company received \\$1,548 from Otisco, Incorporated for 36 -month subscriptions to severai different magaxines. The company credited Unearned Revenue for the amount recelved and the subscriptions started inmediately. Assaming adjustments are only made at year-end. What is the adjusting entry that should be recorded by Garcin Publishing Company on December 3 of the second year? Muituplo Crioke dobit Unearned Revenoe, \\$1,548, aeds Sabscription Reveniex,\u00a0$1,548\u00a0debit Uneerned Revenue, 5515 , credit Suascription Revenue,\u00a0$516<\/p>\n\n\n\n<p><strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-ast-global-color-1-color\">The Correct Answer and Explanation is:<\/mark><\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Correct Adjusting Entry (on December 31 of the second year):<\/h3>\n\n\n\n<p><strong>Debit Unearned Revenue: $516<\/strong><br><strong>Credit Subscription Revenue: $516<\/strong><\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\">Explanation:<\/h3>\n\n\n\n<p>On <strong>April 1<\/strong>, Garcia Publishing Company received <strong>$1,548<\/strong> for <strong>36-month<\/strong> magazine subscriptions. Because the services (magazine issues) are to be delivered over time, the company initially recorded the entire amount as <strong>Unearned Revenue<\/strong>, a <strong>liability<\/strong>, indicating that they owe future service.<\/p>\n\n\n\n<p><strong>Journal Entry on April 1 (initial):<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Debit Cash<\/strong>: $1,548<\/li>\n\n\n\n<li><strong>Credit Unearned Revenue<\/strong>: $1,548<\/li>\n<\/ul>\n\n\n\n<p>The subscription starts <strong>immediately<\/strong>, and revenue is recognized <strong>monthly<\/strong> as the company delivers the magazines. The full subscription period is <strong>36 months<\/strong>, so:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Monthly revenue = $1,548 \u00f7 36 = <strong>$43 per month<\/strong><\/li>\n<\/ul>\n\n\n\n<p>Since adjustments are only made at <strong>year-end<\/strong>, we need to determine how many months of revenue should be recognized <strong>by December 31 of the second year<\/strong>.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Step 1: Determine how many months have passed by that date:<\/h4>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Subscription start: April 1, Year 1<\/li>\n\n\n\n<li>Adjusting entry date: December 31, <strong>Year 2<\/strong><\/li>\n<\/ul>\n\n\n\n<p>That\u2019s a total of:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>From April Year 1 to December Year 1 = 9 months<\/li>\n\n\n\n<li>Full Year 2 = 12 months<br>\u2192 <strong>Total: 21 months<\/strong><\/li>\n<\/ul>\n\n\n\n<h4 class=\"wp-block-heading\">Step 2: Revenue recognized by end of Year 1:<\/h4>\n\n\n\n<ul class=\"wp-block-list\">\n<li>9 months \u00d7 $43 = <strong>$387<\/strong> (already adjusted at end of Year 1)<\/li>\n<\/ul>\n\n\n\n<h4 class=\"wp-block-heading\">Step 3: Revenue to be recognized in Year 2:<\/h4>\n\n\n\n<ul class=\"wp-block-list\">\n<li>12 months \u00d7 $43 = <strong>$516<\/strong><\/li>\n<\/ul>\n\n\n\n<p>This is the <strong>adjusting entry<\/strong> needed at <strong>December 31, Year 2<\/strong>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Final Adjusting Entry:<\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Debit Unearned Revenue<\/strong>: $516<\/li>\n\n\n\n<li><strong>Credit Subscription Revenue<\/strong>: $516<\/li>\n<\/ul>\n\n\n\n<p>This entry correctly shifts 12 months of earned revenue from a liability account to the income statement.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" src=\"https:\/\/learnexams.com\/blog\/wp-content\/uploads\/2025\/05\/learnexams-banner6-110.jpeg\" alt=\"\" class=\"wp-image-220980\"\/><\/figure>\n","protected":false},"excerpt":{"rendered":"<p>On April 1, Garcia Publishing Company received \\$1,548 from Otisco, Incorporated for 36 -month subscriptions to severai different magaxines. The company credited Unearned Revenue for the amount recelved and the subscriptions started inmediately. Assaming adjustments are only made at year-end. What is the adjusting entry that should be recorded by Garcin Publishing Company on December [&hellip;]<\/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-220979","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/220979","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=220979"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/220979\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=220979"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=220979"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=220979"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}