Mentle Publications publishes a gold magazine for women. The magazine sells for
ID: 2387345 • Letter: M
Question
Mentle Publications publishes a gold magazine for women. The magazine sells for $4.00 a copy on the newsstand. Yearly subscriptions to the magazine cost $36 per year (12 issues). During December 2009, Expert Publications sells 4,000 copies of the golf magazine at newsstands and receives payment for 5,000 subscriptions for 2010. Financial statments are prepared monthly.1. Prepare the December 2009 journal entries to record the newsstand sales and subscriptions received. (assume that the debit is to cash)
2. Prepare the necessary adjusting entry on January 31, 2010. The January 2010 issue has been mailed to subscribers.
Explanation / Answer
a) Subcription for 5000x$36=$180,000 News stand sale 4000*$4=$16,000 31 Dec 2009 Cash Dr S196,000 News Stand Sales Cr $16,000 Adv Subscription A/C Cr $180,000 Since the sunscriptions are to be sent to the customers so they will come under the categoty of LIABILITIES. b) Now since the issues for first month have been sent so the LIABILITIES portion will be decreased Price per issue for subsciptions = 36/12 = $3 No of subscriptions = 5000 So the amount to be removed from LIABILITIES =5000*3 = $15,000 So LIABILITIES will be = $180,000-$15,000 = $165,000 And $15,000 will be classified as assets.