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, and NE for no effect) of transactions (a) and (b).
2. Using the information given, prepare the journal entries that would be recorded in 2012 and 2013.