Horse Country Living publishes a monthly magazine for which a12-month subscription costs $30. All subscriptions require paymentof the full $30 in advance. On August 1, 2010, the balance in theSubscriptions Received in Advance account was $40,500. During themonth of August, the company sold 900 yearly subscriptions. Afterthe adjustment at the end of August, the balance in theSubscriptions Received in Advance account is $60,000.
Required
1. Identify and analyze the transaction to record the sale of the900 yearly subscriptions during the month of August.
2. Identify and analyze the adjustment on August 31.
3. Assume that the accountant made the correct entry during Augustto record the sale of the 900 subscriptions but forgot to make theadjustment on August 31. Would net income for August be overstatedor understated? Explain your answer.
Horse Country Living publishes a monthly magazine for which a12-month subscription costs $30. All subscriptions require paymentof the full $30 in advance. On August 1, 2010, the balance in theSubscriptions Received in Advance account was $40,500. During themonth of August, the company sold 900 yearly subscriptions. Afterthe adjustment at the end of August, the balance in theSubscriptions Received in Advance account is $60,000.
Required
1. Identify and analyze the transaction to record the sale of the900 yearly subscriptions during the month of August.
2. Identify and analyze the adjustment on August 31.
3. Assume that the accountant made the correct entry during Augustto record the sale of the 900 subscriptions but forgot to make theadjustment on August 31. Would net income for August be overstatedor understated? Explain your answer.
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