Question

Required information [The following information applies to the questions displayed below.] A local theater company sells 1,500 season ticket packages at a price of $250 per package. The first show in the 10-show season starts this week. (a) The sale of the season tickets before the first show. (b) The revenue from fulfilling the performance obligation by putting on the first show. 1. Indicate the effects of the amounts for the above transactions. (Enter any decreases to assets, liabilities, or stockholders equity with a minus sign.) Stockholders' Equity Assets Liabilities (a) (b)

Answer 1

Solution

1. Effects of the amounts for the above transactions:

	Assets		=	Liabilities		+	Stockholders' Equity
a	Cash	$375,000	=	Unearned Revenue	$375,00	+	-
b	-	-	=	Unearned Revenue	($375,000)	+	Earned Revenue	$375,000

2. Journal Entries:

Transaction	General Journal	Debit	Credit
a	Cash	$375,000
	Unearned Revenue		$375,000
	(sale of tickets before the first show)
b	Unearned Revenue	$375,000
	Revenue Account		$375,000
	(To record revenue after the first show)