Question

Assume TTT (a) collected $420 million in 2018 for magazines that will be distributed later in 2018 and 2019, (b) provided $204 million of services on these subscriptions in 2018, and (c) provided $216 million of services on these subscriptions in 2019.

Using the information given, indicate the accounts, amounts, and accounting equation effects of transactions (a), (b), and (c). (Enter any decreases to assets, liabilities, or stockholders equity with a minus sign. Enter your answers in whole dollars.)

Answer 1

Formula sheet

A	B	C	D	E	F	G	H	I	J
2
3		Since the amount has been paid before actual revenue or services are delivered,
4		therefore the transaction should be recognized as unearned revenue
5		which is liability for the company to perform services in future.
6
7		As per accounting rule, increase in assets and expenses are debited and increase in liability and equity accoutn is credited.
8		Since unearned liability increases in the transaction (a), therefore it should be credited.
9		In the transaction (b) and (c) services have been performed therefore it should be recognized
10		and unearned revenue will decrease and hence debited.
11
12		Journal entries of the transactions will be as follows:
13		Transaction	Account	Debit	Credit
14		a)	Cash	420000000
15			Unearned Revenue		=E14
16
17		b)	Unearned Revenue	204000000
18			Revenue		=E17
19
20		c)	Unearned Revenue	216000000
21			Revenue		=E20
22
23		Effect on accounting Equation:
24
25		Transaction	Assets	=	Liabilities	+	Shareholders' Equity
26		a)	=E14		=F15
27		b)			=-E17		=F18
28		c)			=-E20		=F21
29