Accounting Questions Season tickets for the Dingos are priced at $500 and includ
ID: 2572376 • Letter: A
Question
Accounting Questions
Season tickets for the Dingos are priced at $500 and include 25 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 $2,875,000. By the end of October, $2,300,000 of the Unearned Ticket Revenue had been recognized as revenue.
Account Titles and Explanation
Debit
Credit
On January 1, Cullumber Company issued $354,000, 10%, 10-year bonds at face value. Interest is payable annually on January 1.
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Account Titles and Explanation
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Credit
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Exercise 10-22
Monty Corp. issued $395,000, 7%, 20-year bonds on January 1, 2017, for $322,883. This price resulted in an effective-interest rate of 9% on the bonds. Interest is payable annually on January 1. Monty uses the effective-interest method to amortize bond premium or discount.
Interest
Periods
Interest to
Be Paid
Interest Expense
to Be Recorded
Discount
Amortization
Unamortized
Discount
Bond
Carrying Value
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Date
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Debit
Credit
Jan. 1, 2017
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Debit
Credit
Dec. 31, 2017
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Debit
Credit
Jan. 1, 2018
Season tickets for the Dingos are priced at $500 and include 25 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 $2,875,000. By the end of October, $2,300,000 of the Unearned Ticket Revenue had been recognized as revenue.
Explanation / Answer
Solution:
Problem 1
a) How many home games had the Dingos played by the end of October
Ticket Price for 25 home games = $500
Total recognized amount as revenue = $2,300,000
Number of tickets recognized as game = $2,300,000 / $500 = 4600 tickets
Number of games per ticket = 25
Total number of home games played by the end of October = 4600 * 25 = 115,000 games
b) Prepare the entry for the initial recording of the Unearned Ticket Revenue
Account Titles and Explanation
Debit
Credit
Cash
$2,875,000
Unearned Ticket Revenue
$2,875,000
Problem 2
Prepare journal entry to record the issuance of the bonds.
Jan.1
Account Titles and Explanation
Debit
Credit
Cash
$354,000
Bonds Payable
$354,000
(Bonds are issued at par)
Journal entry to record the accrual of interest on December 31
Date
Account Titles and Explanation
Debit
Credit
Dec.31
Interest Expense (354,000*10%)
$35,400
Interest Payable
$35,400
Journal entry to record the payment of interest on January 1
Date
Account Titles and Explanation
Debit
Credit
Jan.1
Interest Payable
$35,400
Cash
$35,400
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Account Titles and Explanation
Debit
Credit
Cash
$2,875,000
Unearned Ticket Revenue
$2,875,000
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