Final answer:
The adjusting entry at December 31 is necessary to recognize the portion of the season ticket revenue that has been earned as of that date. The adjusting entry would be a debit to revenue and a credit to unearned revenue for the amount of $10,000.
Step-by-step explanation:
The adjusting entry at December 31 is necessary to recognize the portion of the season ticket revenue that has been earned as of that date. Since the team has played 1/3 of their games for the season, they have fulfilled 1/3 of their obligation to provide the value associated with the season tickets. To adjust the revenue, you can divide the total amount received ($30,000) by the number of games in the season and multiply it by the number of games played (1/3).
The adjusting entry would be:
- Debit: Revenue (e.g., Ticket Revenue) - $10,000
- Credit: Unearned Revenue - $10,000
This entry recognizes $10,000 of the revenue as earned revenue and reduces the unearned revenue by the same amount. This adjustment brings the financial statements in line with the actual performance of the team and ensures that the revenue is accurately reflected on the balance sheet and income statement.