Model Maker Sold 6,000 One-Year Prepaid Subscriptions to Its Monthly $$\begin{array} { | l | l | l | } \hline \quad\quad& \quad&\quad \\\hline & & \\\hline\end{array}$$

question 39

Essay

Model Maker sold 6,000 one-year prepaid subscriptions to its monthly magazine for $40 per subscription.The subscription year runs from September to August.What is the December 31 adjusting entry for subscription revenue?
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Definitions:

Disbursement Basis

An accounting method in which expenditures and revenues are recorded when cash is actually disbursed or received, rather than when they are incurred.

Accrual Basis

An accounting method where income and expenses are recorded when they are earned or incurred, regardless of when the cash transaction happens.

GAAP Constraint

Guidelines that restrict or limit certain accounting practices under Generally Accepted Accounting Principles, to ensure fairness, consistency, and accuracy in financial reporting.

Disbursement Basis

Accounting method where expenses are recorded when cash is paid out, rather than when incurred.