Reference no: EM132956085

Questions -

Q1) Movie Time Inc. publishes a monthly movie magazine called Movie Insider. The subscription price is $2 per issue ($24 annually). Subscribers receive their first issue of the magazine in the month that follows the payment of the subscription price. On November 30, 2020, the company had received $120,000 from subscribers for which it had to deliver 60,000 future issues of Movie Insider within the next 12 months. Throughout December 2020, the company delivered 8,000 magazines to subscribers. What is the total deferred revenue to report at the company's year-end on December 31, 2020 (assume there were no new subscriptions in December)?

a) $120,000

b) $104,000

c) $110,000

d) $112,000

Q2) On December 21, 2021, Bubble Soda Ltd. was named as a defendant in a class-action lawsuit alleging $20 million in damages from mislabeling products between 2005 and 2010. The company's legal department believes it is probable the company will lose the lawsuit; however, they are unable to reliably estimate the penalties. Which of the following is the most appropriate way of reporting this event on Bubble Soda's financial statements for 2021?

a) Debit Loss from legal proceedings 20,000,000; Credit Provision (or contingent liability) $20,000,000

b) Debit Contingent Liability $20,000,000; Credit Cash $20,000,000

c) Neither recorded as a liability not reported in the company's notes to its financial statements.

d) The contingency would not be recorded as a liability but it should be reported in the notes to the financial statements.