In November and December 2017, Gee Company, a newly organized magazine publisher, received $36,000 for 1,000 three-year subscriptions at $12 per year, starting with the January 2018 issue of the magazine.

Required:

How much should Gee report in its 2017 income statement for subscriptions revenue on an accrual basis? What are Gee's cash receipts in 2017?

Question

Business

Angelina Frazier

20 February, 21:32

In November and December 2017, Gee Company, a newly organized magazine publisher, received $36,000 for 1,000 three-year subscriptions at $12 per year, starting with the January 2018 issue of the magazine.

Required:

How much should Gee report in its 2017 income statement for subscriptions revenue on an accrual basis? What are Gee's cash receipts in 2017?

+5

Answers (1)

Know the Answer?

Haylie Liu · Answer 1

Gee report in its 2017 income statement for subscriptions revenue will be zero on an accrual basis.

Gee's cash receipts in 2017 is $36,000

Explanation:

In accounting, there are two basis of transaction recognition. These are Accrual and cash basis.

In accrual basis, revenue and expenses are recorded when earned and incurred respectively. In the cash basis on the other hand, revenue and expenses are recognized only when cash is received and paid respectively.

In accrual basis, no revenue will be recognized in the income statement for 2017 as the revenue will be earned from 2018.

For cash basis, $36,000 will be recognized in 2017