In: Accounting
a.
Date | Account Titles | Debit | Credit |
Jan-01 | Cash | $ 576,000 | |
Unearned Revenue | $ 576,000 | ||
Feb-01 | Cash | $ 432,000 | |
Unearned Revenue | $ 432,000 | ||
Aug-01 | Cash | $ 648,000 | |
Unearned Revenue | $ 648,000 | ||
Dec-01 | Cash | $ 864,000 | |
Unearned Revenue | $ 864,000 |
b.
Account Titles | Debit | Credit |
Unearned Revenue | $ 1,314,000 | |
Sales Revenue | $ 1,314,000 | |
Cost of Sales | $ 657,000 | |
Cash | $ 657,000 |
Revenue has been recorded for months expired in the year i.e.
Unearned Revenue x Months expired / 12
=576000*12/12+432000*11/12+648000*5/12+864000*1/12
Monthly Sales revenue per subscription is $72/12 = $6 per
subscription
Monthly cost = $3
Cost of sales = $3/$6 x 100 = 50%
Therefore related expense for current year = $1314000 x 50% =
$657000