Recognition of Income Gentlemen’s Computer Quarterly magazine expects to put out its first regular issue in January of next year. It is now soliciting subscriptions by mailing out a sample preliminary issue with information about how to subscribe. The quarterly has budgeted the following subscriptions, all paid in advance:

50,000 three-year subscriptions at $100 each.

80,000 two-year subscriptions at $80 each.

20,000 one-year subscriptions at $50 each.

a. How much cash will Gentlemen’s Computer Quarterly receive from subscriptions in the first year? How much revyenue will be reported in the first year?

b. If the same number of subscriptions are sold in the second year of operations, how much cash will be received and how much revenue will be reported in the second year?