Question

Evans Ltd. publishes a monthly newsletter for retail marketing managers and requires its subscribers to pay $60 in advance for a one-year subscription. During the month of August 2019, Evans Ltd. sold 500 one-year subscriptions and received payments in advance from all new subscribers. Only 350 of the new subscribers paid their fees in time to receive the August newsletter; the other subscriptions began with the September newsletter.

Use the horizontal model to record the effects of subscription fees received in advance during August 2019.

Answer 1

Answer and Explanation:

According to the scenario, computation of the given data are as follow:-

Total Sales = No. of Subscription Sold × Advance Price of Subscription

= 500 × $60 = $30,000

August Month Received Amount = (No. of Subscriber × Paid Amount) ÷ (1÷12 )

=(350×$60)÷1÷12

= $21,000 ÷ 12

= $1,750

Balance Sheet

Particular Assets($) Liabilities($) Stockholder Equity($) Income($)

Cash 36,000

Unearned revenue 36,000

Earned revenue -1,800 -1,800

Total 36,000 34,200 -1,800

Income Statement

Income Amount ($) Expense ($) Amount ($)

Earned Revenue -1,800