13. On May 1, 2016. Skinner Publishing, Inc. received $3,600 from Carrier Corp t
ID: 2514537 • Letter: 1
Question
13. On May 1, 2016. Skinner Publishing, Inc. received $3,600 from Carrier Corp tor subscription starting May 1, 2016 to a trade magazine they publish. What agjusting journal entry should Skinner Publishing record on December 31, 2016? 5 ACCT DR CR A Subscription Expense 1,800 1,200 3,600 3,600 1,800 B. Subscription Revenue Deferred Revenue 1,200 C. Deferred Revenue Cash D. Deferred Revenue 1,200 Subscription Revenue 1,200 14. A company is fighting litigation and has recorded a contingent liability on the balance sheet for future settlement. Based on the company's treatment of the liability, the settlement is: A. Reasonably possible and estimable B. Probable and not reasonably estimable Remote and not reasonably estimable D. Probable and reasonably estimable 15. Davie Corp has a $63,000,000 note payable on its balance sheet as of 12/31/16 which $6,000,000 is due in 2017. Davie will report the liability as what on its 12/31 balance sheet: A. A $6,000,000 current liability and a $57,000,000 long-term liability B. A $63,000,000 current liability C. A $6,000,000 current liability and a $63,000,000 long-term liability D A $63,000,000 long-term liabilityExplanation / Answer
13)
Received 2 years subscription = $3,600
Subscription received data = May 1, 2016
On Dec 31, 2016 we need to book the subscription revenue for 8 months (May to Dec)
Subscription Revenue = Total Subscription Recd for 2 yrs $3600 / 24 Months x 8 Months = $1200
Adjustment Entry should be:
Debit Deferred Revenue $1200
Credit Subscription Revenue $1200
Hence the correct option is D.
14) The correct option is B. Probable and not reasonably estimable
The existence of contingent liability reported or disclosed in the notes of the financial statements if the liability is reasonably possible but not probable or if the liability is probable but you cannot estimate the amount.
No recording of contingent liability is required if the probability of its occurrence is REMOTE/
15) The current potion which are to be due in next year or within 12 months are reported as current liability on the reporting date of the balance sheet.
Hence, company will report A $6,000,000 current liability and a $57,000,000 long term liability
The correct option is A.
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