Evaluating the Effect of Adjusting Unearned Subscriptions on Cash Flows and Performance as a Manager
You are the regional sales manager for Miga News Company. Miga is making adjusting entries for the year ended March 31, 2013. On September 1, 2012, customers in your region paid $24,000 cash for three-year magazine subscriptions beginning on that date. The magazines are published and mailed to customers monthly. These were the only subscription sales in your region during the year.
Required:
1. What amount should be reported as cash from operations on the statement of cash flows for the year ended March 31, 2013?
2. What amount should be reported on the income statement for subscriptions revenue for the year ended March 31, 2013?
3. What amount should be reported on the March 31, 2013, balance sheet for unearned subscriptions revenue?
4. Give the adjusting entry at March 31, 2013, assuming that the subscriptions received on September 1, 2012, were recorded for the full amount in Unearned Subscriptions Revenue.
5. The company expects your region’s annual revenue target to be $6,000.
a. Evaluate your region’s performance, assuming that the revenue target is based on cash sales.
b. Evaluate your region’s performance, assuming that the revenue target is based on accrual accounting.