Question

Vista newspapers sold 6,000 of annual subscriptions at $125 each on September 1.

How much unearned revenue will exist as of December 31?
a. $0.
b. $500,000.
c. $250,000.
d. $750,000.

Answer 1

Option (B) is correct.

Step-by-step explanation:

Annual Subscription:

= 6000 × $125

= $750,000

Since, the payment was received for 1 Year, we will recognize 4 months revenue (1 September till 31st December) in the given year:

= $750,000 × (4/12)

= $250,000

Unearned Revenue as on 31st December:

= Total Payment Received - Revenue Recognized for 4 months

= $750,000 - $250,000

= $500,000