3-Cash vs Accrual - Cash v.s Accrual Income Measurement In...

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Cash v.s. Accrual Income Measurement In January 2005 Canterbury publishing sells a three-year subscription to its quarterly publication to 1,000 subscribers, at the rate $25 / issue. Subscription plan requires prepayment by the customers each at the beginning of 2005. Canterbury takes out a $100,000 three-year loan on January 1, 2005 with interest 10% of the face amount of the loan each year. Interest is not payable until the loan matures on 12/31/2007.
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Cash v.s. Accrual Income Measurement The cost of publishing and distributing the magazine amount to $60,000 each year ($60 per subscriber), which is paid in cash at the time of publication Subscription revenue: $25 * 12 * 1000 = $300,000 Annual interest: $100,000 * 10% = $10,000
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DR Cash $300,000 CR Subscription revenue $300,000 To record collection of 1,000 three-years subscription at $300 each. DR Pub. & dist. expense
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  • Summer '06
  • FrankZhang
  • Generally Accepted Accounting Principles, subscription revenue, CR Cash, expense CR cash, dist. expense CR

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3-Cash vs Accrual - Cash v.s Accrual Income Measurement In...

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