E10-6 Determining and Recording the Financial Statement Effects of Un Revenue [L
ID: 2488832 • Letter: E
Question
E10-6 Determining and Recording the Financial Statement Effects of Un Revenue [LO 10-2 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.) ransaction AssetsExplanation / Answer
(1)
(a) Cash (Asset) increases by $420 million & Deferred Revenue (Liabilities) increases by $420 million.
(b)
(i) In 2012, Revenue (Revenue account) increases by $204 million & Deferred Revenue (Liabilities) decreases by $204 million.
(ii) In 2013, Revenue (Revenue account) increases by $216 million** & Deferred Revenue (Liabilities) decreases by $216 million.
**= (420 - 204) million
(2)
(a)
DR Cash $420,000,000
Deferred Revenue $420,000,000
(To record deferred revenue)
(b) For 2012:
DR Deferred Revenue $204,000,000
Revenue $204,000,000
(To record revenue earned in 2012)
(c) For 2013:
DR Deferred Revenue $216,000,000
Revenue $216,000,000
(To record revenue earned in 2013)
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