On June 1, Addidas Co. sold 15,000 yearly subscriptions of its monthly magazine

Question

On June 1, Addidas Co. sold 15,000 yearly subscriptions of its monthly magazine to customers for $22.00 each. Customers received their first subscription of the magazine July 1. Prepare the journal entries for June 1 and July 1.

Madison Co. sells 13,000 scanners at a price of $250.00 each. The selling price includes a warranty (1 year) on parts. Madison expects that 4.5% of the scanners will be defective and that warranty repair costs will be $56 per unit. Complete the following:

a. Journalize the sale (assume a 7.75% sales tax rate)7.

b. Estimate, and then journalize the warranty liability.

6. Madison 101 honored scanners (from #5 above). Prepare the journal entry needed.

Lucy Company signed a 4 – year, 6.5%, $160,000 note payable. They are required to make annual payments of $40,000 (principal), and interest owed.

a. Journalize the issuance of the note

b. Journalize the first two annual payments

Explanation / Answer

1) Prepare the journal entries for June 1 and July 1.

date accounts & explanation debit credit June 1 Cash a/c (15000*22) 330000       Unearned subscriptions revenue a/c 330000 (To record unearned subscription revenue) July 1 Unearned susbcription revenue a/c 27500        Subscription revenue a/c (330000/12) 27500 (To record unearned subscription revenue adjusted)

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