Question

On december 3, the celtics sold a six-game pack of advance tickets for $3,000 cash. on december 20, the celtics played the first game of the six-game pack (this represented one-sixth of the advance ticket sales). record the entry for the december 3 transaction.

How should the December 3 transaction entry for the Celtics' advance ticket sales be recorded?
A) Debit Cash $3,000; Credit Unearned Revenue $3,000.
B) Debit Sales $3,000; Credit Unearned Revenue $3,000.
C) Debit Cash $3,000; Credit Accounts Payable $3,000.
D) Debit Unearned Revenue $3,000; Credit Sales $3,000.

Answer 1

The correct journal entry for the advance sale of Celtics tickets on December 3 is to debit Cash for $3,000 and credit Unearned Revenue for $3,000, reflecting the receipt of cash for services not yet provided. Option A

Step-by-step explanation:

The correct journal entry for the Boston Celtics' transaction on December 3, for the advance sale of a six-game ticket pack, should be recorded as A) Debit Cash $3,000; Credit Unearned Revenue $3,000.

This accounting treatment is based on the principle that the money received in advance for services yet to be delivered or goods yet to be provided represents a liability, not yet earned income. Until the Celtics play the games included in the ticket pack, the money is considered unearned revenue and should not be recorded as sales revenue.

The revenue will be recognized as each game is played. On December 20, when the first game is played, one-sixth of the unearned revenue becomes earned. Hence, a separate transaction would be made to recognize this revenue. Option A