PrimeFlix sells one-year online subscriptions for viewing classic movies. Customers are required to pay for the subscription at the beginning of the subscription period. On April 1, 2021, total sales of one-year subscriptions are $12,000.
What is the adjusted balance of Deferred Revenue on December 31, 2021?
$9,000.
$3,000.
$0.
$12,000.

$3,000

Explanation:

Given that,

On April 1, 2021, total sales of one-year subscriptions = $12,000

Total number of months for which subscription is received = 12 months

Months Relating to year 2022 for which subscription received on 1 April 2021:

= From January 1, 2022 to March 31, 2022

= 3 Months

Deferred revenue is for the three months.

Therefore, the adjusted balance of Deferred Revenue on December 31, 2021 is as follows:

= Amount of subscriptions received × Time period

= $12,000 × (3 ÷ 12)

= $3,000

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