B is corrent. SFAC 5 states that revenues are to be recognized when realized or realizable, and earned. At 12/31/Y1, none of the subscription revenue has been earned, since magazine delivery will not begin until year 2. Therefore, unearned subscriptions revenue in the 12/31/Y1 balance sheet is $72,000 and subscriptions revenue in the year 1 income statement is $0. Note that the treatment of the $72,000 collection for tax purposes does not determine its treatment for financial accounting purposes.
A is incorrect. SFAC 5 states that revenues are to be recognized when realized or realizable, and earned. At 12/31/Y1, none of the subscription revenue has been earned, since magazine delivery will not begin until year 2. Therefore, unearned subscriptions revenue in the 12/31/Y1 balance sheet is $72,000 and subscriptions revenue in the year 1 income statement is $0. Note that the treatment of the $72,000 collection for tax purposes does not determine its treatment for financial accounting purposes.
C is incorrect. SFAC 5 states that revenues are to be recognized when realized or realizable, and earned. At 12/31/Y1, none of the subscription revenue has been earned, since magazine delivery will not begin until year 2. Therefore, unearned subscriptions revenue in the 12/31/Y1 balance sheet is $72,000 and subscriptions revenue in the year 1 income statement is $0. Note that the treatment of the $72,000 collection for tax purposes does not determine its treatment for financial accounting purposes.
D is incorrect. SFAC 5 states that revenues are to be recognized when realized or realizable, and earned. At 12/31/Y1, none of the subscription revenue has been earned, since magazine delivery will not begin until year 2. Therefore, unearned subscriptions revenue in the 12/31/Y1 balance sheet is $72,000 and subscriptions revenue in the year 1 income statement is $0. Note that the treatment of the $72,000 collection for tax purposes does not determine its treatment for financial accounting purposes.
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