Question

On December 6 received $30,000 for season tickets for new season of the Chess Champions League. As of December 31, the team has played 1/3 of their games for the season. Give the journal entry to account for the cash received?

Answer 1

The student should make a journal entry that debits Unearned Ticket Revenue for $20,000 and credits Ticket Revenue for $10,000, representing the portion of the games played and the revenue earned as of December 31.

Step-by-step explanation:

When the student received $30,000 on December 6 for season tickets for the new season of the Chess Champions League, it is necessary to account for this transaction in their bookkeeping. Since 1/3 of the games have been played by December 31, the revenue earned must be recognized proportionately. The appropriate journal entry on December 31 would include crediting a liability account (Unearned Ticket Revenue) for the portion of the games not yet played and debiting an income account (Ticket Revenue) for the portion of the revenue that has been earned (1/3 of the games).

Journal Entry on December 31:

1. Debit Unearned Ticket Revenue: $20,000 (2/3 of $30,000, representing the portion of the games not yet played)
2. Credit Ticket Revenue: $10,000 (1/3 of $30,000, representing 1/3 of the games that have been played)

This recognizes the earned revenue from 1/3 of the games while still showing a liability for the games that will be played in the future.