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Topic
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MCQ #445
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:A.
$2,700,000.Incorrect B.
$1,800,000.C.
$1,650,000.D.
$900,000.This company gets $10,000 in cash. It sound to me like the customers who sign up and pay October 1st to October 15th do not receive a shipped magazine on October 15th. That means there’s 90 days X 10,000 = 900,000 dollars of cash you collect without ever providing a magazine.
Then there’s also 180 days from April 1st to Sept 30th where you take in 1,800,000, but only earn half of it by sending out 1 of 2 semi annual publications in October. So that means half of the 1.8M is still deferred revenue.
By my math, the total deferred revenue is then 900K + 900K = $1.8M. Where did I go wrong?
BEC - 87 | 02/28
REG - 70 | 06/10, REMATCH | 08/30
AUD - XX | 09/10
FAR - XX | 12/10
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