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 $394 million in 2016 for magazines that will be delivered later in 2016 and 2017, and (b) delivered $190 million worth of magazines on these subscriptions in 2016.

Required:

1. Using the information given, indicate the accounts, amounts, and accounting equation effects (+ for increase, − for decrease, and NE for no effect) of the transactions involving $394 million and $190 million.

2. Using the information given, prepare the journal entries that would be recorded in 2016 and 2017.