Ask Question
28 February, 20:01

On October 1, Sponge Bob, Inc. received $240 up front from a customer for a yearly magazine subscription. Magazines are provided one per month. Record the following journal entries. a. Record the initial receipt of payment from the customer on October 1b. Record the adjusting entry for three months of magazines provided to the customer by December 31 (for October, November, and December)

+2
Answers (1)
  1. 28 February, 22:40
    0
    a. Debit Cash account $240

    Credit Unearned/deferred revenue $240

    Being entries for cash received up front for yearly magazine subscription.

    b. Debit Unearned/deferred revenue $60

    Credit Subscription revenue $60

    Being entries to recognize revenue earned by 31 December

    Explanation:

    When cash is received in advance from customers, this represents a liability to the entity as the company has an obligation as a result of the past receipt of cash.

    Since On October 1, Sponge Bob, Inc. received $240 up front from a customer for a yearly magazine subscription. Magazines are provided one per month.

    Monthly earnings = 1/12 * $240 = $20

    Entries required on October 1 for Sponge Bob, Inc. are

    Debit Cash account $240

    Credit Unearned/deferred revenue $240

    Being entries for cash received up front for yearly magazine subscription.

    For 3 months of magazines provided to the customer by December 31

    Revenue earned = 3 * $20 = $60

    Adjusting entries required by 31 December

    Debit Unearned/deferred revenue $60

    Credit Subscription revenue $60

    Being entries to recognize revenue earned by 31 December
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “On October 1, Sponge Bob, Inc. received $240 up front from a customer for a yearly magazine subscription. Magazines are provided one per ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers