EXERCISE 10-4

Purpose: (L.O. 3) This exercise will illustrate the accounting for unearned revenue.

Soap Opera Summarized is published by Viewer Publishers. Subscriptions to the magazine are sold for a one-year, two-year, or three-year period. Cash receipts from subscribers are credited to Unearned Subscription Revenue, and this account had a balance of $3,000,000 at December 31, 2014, before adjustment. Outstanding subscriptions at December 31, 2014, expire as follows:

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Instructions

  1. Prepare the journal entry to adjust the Unearned Subscription Revenue account at December 31, 2014.
  2. Explain how relevant amounts will be reported on the annual financial statements prepared at the end of 2014.

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