Question

A civic ballet company sells 100 "Benefactor" status memberships for $1,000 each. The Benefactors each receive a season ticket valued at $400, and a listing in the company's program. How would the ballet company record the sale of these 100 memberships?

A) Cash $100,000
Deferred Revenue $100,000
B) Cash - Restricted $ 60,000
Cash - Unrestricted 40,000
Contributions - Restricted $ 60,000
Revenue 40,000
C) Cash $100,000
Revenue $ 40,000
Contributions - Restricted 60,000
D) Cash $100,000
Deferred Revenue $ 40,000
Contributions - Unrestricted 60,000

Answer 1

The ballet company would record the sale of these 100 memberships using option B): Record $60,000 as Cash - Restricted, $40,000 as Cash - Unrestricted, $60,000 as Contributions - Restricted, and $40,000 as Revenue.

Step-by-step explanation:

The ballet company would record the sale of these 100 memberships using option B):

1. Record $60,000 as Cash - Restricted, representing the portion of the membership fees that is immediately available for use.
2. Record $40,000 as Cash - Unrestricted, representing the portion of the membership fees that is not restricted in use.
3. Record $60,000 as Contributions - Restricted, representing the value of the season tickets received by the Benefactors.
4. Record $40,000 as Revenue, representing the portion of the membership fees that will be recognized as revenue over the season.