Get in Shape, a healthy living magazine, collected $528,000

Get in Shape, a healthy living magazine, collected $528,000 in subscription revenue on May 31. Each subscriber will receive an issue of the magazine in each of the next 12 months, beginning with the June issue

The company uses the accrual method of accounting. What is the balance in the Unearned Revenue account as of December 31?
A) $220,000
B) $308,000
C) $528,000
D) $396,000

ANSWER

A .Unearned Revenue $528,000
Number of months of subscription 12 months
Subscription Revenue per month ($528,000 / 12 ) $44,000
Number of months from May till December 7 months
Subscription Revenue from May till December ($44,000 × 7 months) $308,000
Unearned Revenue as of December ($528,000 – $308,000 ) $220,000