Question

McKinnon Enterprises owns a professional ice hockey team, the Rockford Penguins. The company sells season tickets for its upcoming season and receives $960,000 cash. The season starts January 1, 2018, with five home games occurring monthly over the next six months. What is the balance in the company’s deferred revenue account at the end of April 2018? (Assume the deferred revenue account had a zero balance on January 1, 2018.) Select one: A. $480,000 B. $640,000 C. $960,000 D. $320,000 E. None of the above

Answer 1

Answer:

option (B) $640,000

Explanation:

Data provided:

Amount received =  $960,000

Total duration of a season = 6 months

Duration from January 1, 2018 to April 2018 = 4 months

Therefore,

The Deferred revenue recognized = $\frac{\textup{960,000}}{\textup{6 months}}$   × 4 months

or

The Deferred revenue recognized = $160,000 × 4 months

or

The Deferred revenue recognized = $640,000

Hence,

The correct answer is option (B) $640,000