University Survival Magazine Ltd. is a small company run by two enterprising university students. They publish an issue of the magazine once a month from September through April. The magazine reports on various university activities and provides information such as how to get the best concert tickets, where to get the best pizza for the best price, where the good study spots are, and how to get library staff to help with research. The magazine is sold either on a prepaid subscription basis for $12.00 for all eight issues, or for $2.00 per issue. During September, 2,000 subscriptions were sold. Up to the end of December, a total of 13,000 single copies were sold.
The company also pre-sells advertising space in the magazine to local businesses that focus on the student market. During July and August, the company signed up several businesses and collected $20,000 in advertising revenues. The advertisements are to be included in all eight issues of the magazine. The cost of printing and distributing the first four issues of the magazine was $42,000, of which $38,000 was paid by the end of December. Miscellaneous other expenses totalling $2,000 were incurred and paid in cash between September and December.

Required

a. Journalize all the transactions to the end of December.

b. Prepare any necessary adjusting entries on December 31.

c. Prepare a simple statement of income for the magazine, for the period from July to December.

d. Calculate the balance in the magazine’s Cash account on December 31.

e. Write a brief memo to the owners of University Survival Magazine that explains why their net income is less than the net cash generated by their operations.