Rock On Magazine Co. sold 11,400 annual subscriptions of Rock Onfor $35 during D

Question

Rock On Magazine Co. sold 11,400 annual subscriptions of Rock Onfor $35 during December 2008. These new subscribers willreceive monthly issues, beginning in January 2009. Inaddition, the business had taxable income of $140,000 during thefirst calendar quarter of 2009. The federal tax rate is35%. A quarterly tax payment will be made on April 7,2009.

Prepare the current liabilities section of the balancesheet for Rock On Magazine Co. on March 31, 2009.

(Text gives current liabilities as,$348,250.)

Explanation / Answer

Magazines sold 11,400 * 35 = 399,000 and this amount isunearned revenue and it is a current liability ( one yr period -annual subscription). And Jan 2009 to Mar 2009 3 months worthof subscription is used and expired. 399,000   = $ 99,750 is expired and it is not acurrent liability anymore.     4 So, unearned revenue on Mar 31st will be 399,000 - 99,750 =299,250 Taxes on net income of 140,000 * 35 % (Tax Payable-C.L) = 49,000 Current liabilities Unearned revenue 299,250 Taxpayable            49,000 Total C. liabilities 348,250

Related Questions

Navigate

• Browse (All)
• Browse R
• Subjects

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