Question

A New York City daily newspaper called "Manhattan Today" charges an annual subscription fee of $108. Customers prepay their subscriptions and receive 270 issues over the year. To attract more subscribers, the company offered new subscribers the ability to pay $110 for an annual subscription that also would include a coupon to receive a 40% discount on a one-hour ride through Central Park in a horse-drawn carriage. The list price of a carriage ride is $100 per hour. The company estimates that approximately 30% of the coupons will be redeemed.

Required:

Prepare the journal entry to recognize the sale of 10 new subscriptions, clearly identifying the revenue or unearned revenue associated with each performance obligation.

Answer 1

Answer
Revenue should be recognized for separate performance obligations when those
performance obligations are satisfied.
Working note:to recognize sale of 10 new subscriptions
Standalone selling price of coupon($100*30%*40%)	$12
Standalone selling price of normal subcription	$108
share of coupon [$110/($12+$108)]*$12	$11
share of subcription[$110/($12+$108)]*$108	$99
Journal Entry
Date	Account titles and explanations	Debit ($)	Credit ($)
	Cash(10*$110)	$     1,100
	To,Deferred revenue-Subcription(10*$99)		$         990
	To,Deferred revenue-Discount coupon(10*$11)		$         110
	(To record sale of subscriptions.)
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