Question

On September 1, Year 1, the Central Illinois University ticket office sold $1,800,000 worth of season basketball tickets. Ten home games will be played: four games will be played during Year 1 and six games will be played during Year 2. What is the adjusted balance in Deferred Revenue account at December 31, Year 1?

Answer 1

Answer:

The adjusted balance in Deferred Revenue at the end of year 1 is $1,080,000.

Explanation:

Deferred revenue is also known as unearned revenue which means that income is received but not earned. In accrual basis accounting, we record revenues only after we deliver the goods or perform the services.

In this case, the $1,800,000 is received for 10 home games which means that per game we received 1,800,000/10 = 180,000.

Since only 4 games were played during the year, the revenue earned at the end of year 1 is: 180,000*4= 720,000

The remaining 6 games will be played in year 2 but we have already received the payment of games, so it will be considered as a Deferred Revenue. The amount of Deferred Revenue at the end of year 1 is:

⇒ 180,000*6 = 1,080,000