S3-11. (Learning Objective 3: Adjust the accounts for unearned revenue) Write aparagraph to explain why unearned revenues are liabilities instead of revenues. In your explanation, use the following actual example: The New York Times, a national newspaper, collects cashfrom subscribers in advance and later provides news content via print newspapers and onlineaccess to subscribers over a one-year period. Explain what happens to the unearned revenueover the course of a year as The New York Times delivers papers and online content to subscribers. Into what account does the earned subscription revenue go as The New York Times deliverspapers and online content? Give the journal entries that The New York Times would make to (a)collect $85,000 of subscription revenue in advance and (b) record earning $40,000 of subscription revenue. Include an explanation for each entry, as illustrated in the chapter.
S3-11. (Learning Objective 3: Adjust the accounts for unearned revenue) Write a
paragraph to explain why unearned revenues are liabilities instead of revenues. In your explanation, use the following actual example: The New York Times, a national newspaper, collects cash
from subscribers in advance and later provides news content via print newspapers and online
access to subscribers over a one-year period. Explain what happens to the unearned revenue
over the course of a year as The New York Times delivers papers and online content to subscribers. Into what account does the earned subscription revenue go as The New York Times delivers
papers and online content? Give the
collect $85,000 of subscription revenue in advance and (b) record earning $40,000 of subscription revenue. Include an explanation for each entry, as illustrated in the chapter.
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