Question

on july 1, 2013, bikram yoga natick sells 5 annual memberships for $1,200 each. what would the entry look like to record the receipt of cash as deferred revenue?

Answer 1

The entry to record the sale of 5 annual memberships by Bikram Yoga Natick as deferred revenue would be a debit to Cash and a credit to Deferred Revenue for $6,000.

Step-by-step explanation:

On July 1, 2013, Bikram Yoga Natick sells 5 annual memberships for $1,200 each. The receipt of cash would be recorded as deferred revenue because the service to the customers will be provided over the span of the next year, rather than immediately. In accounting terms, this is considered a liability because it is an obligation to provide services in the future.

The journal entry to record this transaction would be:

• Debit Cash for $6,000 (5 x $1,200)
• Credit Deferred Revenue (Liability account) for $6,000

This entry reflects the increase in cash as well as the corresponding increase in the company's obligations to its members.