Healthy Living, a Diet Magazine, Collected $500,000 in Subscription Revenue

question 59

Essay

Healthy Living, a diet magazine, collected $500,000 in subscription revenue in May. Each subscriber will receive an issue of the magazine for each of the next 12 months, beginning with the June issue. The company uses the accrual method of accounting. Provide the journal entry for collection of cash in May. Assume the magazine initially records a liability for the subscription revenue.

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Definitions:

Annum

A Latin word that means "year," often used to denote a period of time equal to one calendar year.

Repaid

The act of paying back money that was borrowed.

Interest Rate

The portion of borrowed funds or capital utilized that incurs a cost, traditionally mentioned as a percentage for each year.

Loan

A financial agreement where a lender provides funds to a borrower, who agrees to repay the amount with additional interest over a defined period.