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17 September, 13:49

The Present Times Newspaper Company showed a $14,000 liability in its 2020 balance sheet for subscription revenue received in advance. During 2021, $60,000 was received from customers for subscriptions and the 2021 income statement reported subscription revenue of $25,000. What is the liability amount for deferred subscription revenue that will appear in the 2021 balance sheet?

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  1. 17 September, 14:18
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    The liability for deferred revenue is $ 49,000

    Explanation:

    Computation for deferred revenue liability

    The closing deferred revenue liability is calculated by the following equation.

    Opening Deferred Revenue + Cash Subscriptions received - Subscription revenue = Closing Deferred Revenue

    $ 14,000 + $ 60,000 - $ 25,000 = $ 49,000

    Another approach is that out of the $ 60,000 received as cash, the earned revenue part was only $ 25,000 so the incremental $ 35,000 is added to the opening deferred revenue $ 14,000 to get the closing value of $ 49,000
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