I have a question about the answer of my prob. Here is the prob: Journalize unea
ID: 2500205 • Letter: I
Question
I have a question about the answer of my prob. Here is the prob:
Journalize unearned revenue transactions.
(LO 3), AP
Instructions
a) repare entry for the inital recording to the unearned ticket revenue
The answer is:
NOw, my question is, why are we debiting from cash? I thought it would be accounts receivable?
E10-6Journalize unearned revenue transactions.
(LO 3), AP
Season tickets for the Wildcats are priced at $320 and include 16 home games. An equal amount of revenue is recognized after each game is played. When the season began, the amount credited to Unearned Ticket Revenue was $1,728,000. By the end of October, $1,188,000 of the Unearned Ticket Revenue had been recognized as revenue.Instructions
1. How many season tickets did the Wildcats sell? 2. How many home games had the Wildcats played by the end of October? 3. Prepare the entry for the initial recording of the Unearned Ticket Revenue. 4. Prepare the entry to recognize the revenue after the first home game had been played.Explanation / Answer
a) Prepare entry for the initial recording to the unearned ticket revenue
The answer is:
Cash
1728000
0
Unearned Ticket Revenue
0
1728000
Unearned Ticket Renveue
108000
0
Ticket Revenue
0
108000
NOw, my question is, why are we debiting from cash? I thought it would be accounts receivable?
Answer:
The first journal entry is for recording the receipt for unearned revenue. Receipt means collection in cash, so we should debit cash because the revenue has been received in cash, although it has not been earned so far.
Cash
1728000
0
Unearned Ticket Revenue
0
1728000
Unearned Ticket Renveue
108000
0
Ticket Revenue
0
108000
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