Question

Ticketsales, Inc., receives $5,000,000 cash in advance ticket sales for a four-date tour of Bon Jovi. Record the advance ticket sales on October 31. Record the revenue earned for the first concert date of November 5, assuming it represents one-fourth of the advance ticket sales. Ticketsales, Inc. initially records prepaid and unearned items in balance sheet accounts.
1.Record the sales in advance of concerts.
2. record the concert revenues earned.

Answer 1

Answer:

1.

Oct 31

Cash                                              $5,000,000 Dr

     Unearned Ticket Revenue              $5,000,000 Cr

2.

Nov 5

Unearned Ticket Revenue         $1,250,000 Dr

       Ticket Revenue                                $1,250,000 Cr

Explanation:

1.

The ticket revenue received in advance is a liability and as the liability is increasing it will be credited as an unearned ticket revenue. We are receiving cash in advance so cash will be debited as asset is increasing.

2.

After the first concert, one fourth of the unearned ticket revenue has been earned so liability of unearned ticket revenue will be debited and revenue item represented by ticket revenue will be credited. The amount will be,

Ticket Revenue per concert = 5000000/4  =  1250000