[ab29]

Can someone dumb down the answer for me.

Winn Co. sells subscriptions to a specialized directory that is published semiannually and shipped to subscribers on April 15 and October 15. Subscriptions received after the March 31 and September 30 cutoff dates are held for the next publication. Cash from subscribers is received evenly during the year and is credited to deferred subscription revenue. Data relating to 20X1 are as follows:

Deferred subscription revenue (January 1, 20X1): $ 750,000

Cash receipts from subscribers: 3,600,000

In its December 31, 20X1, balance sheet, Winn should report deferred subscription revenue of:

Answer: $900,000

[Eskypades]

Since the cash is received evenly throughout the year, the $3,600,000 should be divided by 12 months to get a per month cash receipt basis of $300,000. You have nine months worth of earned revenue – January through September since anything received after the September publication is held until the following publication in April. $300,000 x 9 = $2,700,000. All of the January 1 balance of deferred revenue ($750,000)would be used up for the first publication. So of the $3,600,000 cash received during the year, $2,700,000 is earned, leaving $900,000 ($3,600,000 – $2,700,000) in deferred revenue.

That's my understanding of it, anyway. Hope this helps.

[CoachEmUp]

I think the question is a bit unclear. I read it as the subscription payment gets you 2 issues, in other words if you paid after March, Winn would still have unearned revenue at the end of the year because it still has to deliver 1 more subscription to those subscribers who paid after March. But if a subscription is just 1 issue then yes, 900,000 is the right answer.

Licensed CPA in Michigan

Used Wiley CPA Excel Throughtout
FAR- 90 (7/17)
AUD- 89 (8/17)
REG- 92 (10/17)
BEC- 94 (11/17)

[Author]

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