Question

AP Season tickets for the Dingos are priced at $320 and include 16 home games. An equal amount of revenue is recognized after each game is played. When the season began, the amount credited to Unearned Ticket Revenue was $1,728,000. By the end of October, $1,188,000 of the Unearned Ticket Revenue had been recognized as revenue. Journalize unearned revenue transactions. Instructions a. How many season tickets did the Dingos sell? b. How many home games had the Dingos played by the end of October? c. Prepare the entry for the initial recording of the Unearned Ticket Revenue. d. Prepare the entry to recognize the revenue after the first home game had been played.

Answer 1

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Answer 2

Answer:

a.

Season tickets the Dingos sold: 5,400 tickets;

b.

Home games the Dingos played by the end of October: 11 games;

c.

The entry for the initial recording of the Unearned Ticket Revenue:

Dr Cash                                            1,728,000

Cr Unearned Ticket Revenue        1,728,000

d.

The entry to recognize the revenue after the first home game had been played:

Dr  Unearned Ticket Revenue        108,000

Cr Revenue                                     108,000

Explanation:

As an equal amount of revenue is recognized after each game is played, this amount is calculated as: Total Unearned Ticket Revenue at the beginning of the season / Total number of home games = 1,728,000/16 = $108,000.

a.

Number of tickets sold = Total Unearned Ticket Revenue at the beginning of the season / Price per ticket = 1,728,000 / 320 = 5,400 tickets

b.

Home games played by the end of October = Recognized unearned revenue by the end of October / equal amount of revenue recognized after each game = 1,188,000/108,000 = 11 games.

c.

As ticket is bought in cash, Cash account goes up (Dr) by $1,728,000; Unearned Ticket Revenue also goes up (Credit - as this is liability account) by the same amount.

d.

After the first home game is played, an equal amount of revenue recognized after each game should be recorded as revenue by decreasing the Unearned Ticket Revenue ( Dr) by 108,000 and increases (Cr) the revenue account by 108,000.