Blank 1: established an accounts payable for the / received cash from
Blank 2: after / before
Blank 3: a receivable / an obligation
Blank 4: earned / unearned
Blank 5: earned / unearned
Blank 6: earned / unearned
Required 1. Complete the paragraph explaining why unearned revenues are liabilities instead of revenues. In the explanation, use the following actual example: Maclean's magazine collects cash from subscribers in advance and later delivers magazines to subscribers over a one-year period. Explain what happens to the unearned subscription revenue over the course of a year as Maclean's delivers magazines to subscribers. Into what account does the unearned subscription revenue go as Maclean's delivers magazines? 2. Give the journal entries that Maclean's would make to: a. Collect $42,000 of subscription revenue in advance. b. Record earning $6,000 of subscription revenue. Include an explanation for each entry. Requirement 1. Complete the paragraph explaining why unearned revenues are liabilities instead of revenues. In the explanation, use the following actual example: Maclean's magazine collects cash from subscribers in advance and later delivers magazines to subscribers over a one-year period. Explain what happens to the unearned subscription revenue over the course of a year as Maclean's delivers magazines to subscribers. Into what account does the unearned subscription revenue go as Maclean's delivers magazines? Unearned revenues are liabilities because Maclean's has subscribers providing them with magazines. Receiving the cash in advance creates for Maclean's. As Maclean's delivers magazines to subscribers, Maclean's earns the revenue, and the dollar amount of the revenue is transferred from revenue revenue to Requirement 2. Give the journal entries that Maclean's would make to (a) collect $42,000 of subscription revenue in advance and (b) record earning $6,000 of subscription revenue. Include an explanation for each entry. (Record debits first, then credits. Enter explanations on the last line.) a. Begin by recording the entry to show Maclean's collecting subscription revenue in advance. Journal Entry Accounts and Explanations Debit Date Credit b. Now record the entry to show Maclean's earning the subscription revenue. Journal Entry Accounts and Explanations Date Debit Credit
