Alex Rodriguez Inc . a publishing company, is preparing its December 31.2010 fin

Question

Alex Rodriguez Inc . a publishing company, is preparing its December 31.2010 financial statements and must determine the proper accounting treatment for the following situations. Rodriguez sells subscriptions to several magazines for a 1-year. 2-year, or 3 year period Cash receipts from subscribers are credited to magazine subscriptions collected in advance and this account had a balance of $2, 300,000 at December 31. 2010 Outstanding subscriptions at December 31. 2010. expire as follows During 2011-$600.000 During 2012-500.000 During 2013-800,000 Prepare the journal entry that should be recorded as of December 31. 2010.

Explanation / Answer

Since there is 2,300,000 in the account and only 1,900,000 outstanding subscriptions we can presumably take 400,000 to revenue. DR Subscriptions collected in advance 400,000 CR Subscription revenue 400,000

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