A New York City daily newspaper called “Manhattan Today” charges an annual subsc

Question

A New York City daily newspaper called “Manhattan Today” charges an annual subscription fee of $108. Customers prepay their subscriptions and receive 220 issues over the year. To attract more subscribers, the company offered new subscribers the ability to pay $110 for an annual subscription that also would include a coupon to receive a 40% discount on a one-hour ride through Central Park in a horse-drawn carriage. The list price of a carriage ride is $100 per hour. The company estimates that approximately 30% of the coupons will be redeemed.

Prepare the journal entry to recognize sale of 11 new subscriptions, clearly identifying the revenue or unearned revenue associated with each performance obligation. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

A New York City daily newspaper called “Manhattan Today” charges an annual subscription fee of $108. Customers prepay their subscriptions and receive 220 issues over the year. To attract more subscribers, the company offered new subscribers the ability to pay $110 for an annual subscription that also would include a coupon to receive a 40% discount on a one-hour ride through Central Park in a horse-drawn carriage. The list price of a carriage ride is $100 per hour. The company estimates that approximately 30% of the coupons will be redeemed.

Explanation / Answer

1) The amount of $ 110 received for an annual subscription is to be transferred to unearned revenue , as the services against these subscriptions have not been fulfilled yet Every month , on delivering the required number of magazines, prorata amount is to be transferred from unearned revenue account to revenue account. till the unearned revenue becomes nil 2) One performance obligation in this contract is to deliver the required number of magazines on the due date Secondly , the obligation is to provide the discount coupon to every subscriber 3) Journal entries Cash Dr 1210          Unearned Revenue Cr 1210 ( to record receipt of 11 new subscriptions) Business Promotion expenses Dr 440           Cash Cr 440 ( To record expense booked for giving discount coupon) Unearned revenue Dr 100.8333                   Revenue Cr 100.8333 ( To record transferring of income everymonth on fulfilling the obligation)

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.