Reader’s Digest Association is a publisher of magazines, books, and music collec

Question

Reader’s Digest Association is a publisher of magazines, books, and music collections. The following note is from a recent annual report: Revenues Sales of our magazine subscriptions are deferred (as unearned revenue) and recognized as revenues proportionately over the subscription period. Assume that Reader’s Digest (a) collected $420 million in 2012 for magazines that will be delivered later in 2012 and 2013, and (b) delivered $204 million worth of magazines on these subscriptions in 2012. Required: 1. Using the information given, indicate the accounts, amounts, and accounting equation effects (+ for increase, for decrease) of transactions (a) and (b). (Enter all amounts as positive values. Enter your answers in whole dollars.)

Explanation / Answer

Assets = Liabilities and Stockholders' Equity Cash Unearned Revenue Retained Earnings 2012 + $ 420 million + $ 420 million - $ 204 million + $ 204 million $ 420 million $ 216 million $ 204 million

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