The Scarlet Pages, a semi-professional hockey team, prepare financial statements on a monthly basis. Their season begins in October, but in September the team engaged in the following transactions:________
(a) Paid $150,000 to Oklahoma City as advance rent for use of Oklahoma City Arena for the six-month period October 1 through March 31.
(b) Collected $450,000 cash from sales of season tickets for the team’s 30 home games. This amount was credited to Unearned Ticket Revenue.
(c) During the month of October, the Scarlet Pages played five home games.

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jepessoa jepessoa · Answer 1 · 2020-02-07T14:23:40+01:00

Answer:

A) September X. Paid $150,000 as advance rent. for 6 months.

Dr Prepaid Rent 150,000 (asset account increases)

Cr Cash 150,000 (asset account decreases)

Since the rent covers a 6 month period, at the end of each month a partial recognition of the rent expense must be made. $150,000 x 1/6 = $25,000

October 31. Recognition of one month of rent (October)

Dr Rent Expense 25,000 (expense account increases)

Cr Prepaid Rent 25,000 (asset account decreases)

B) September X. Collection of $450,000 from sales of season tickets (30 games per season)

Dr Cash 450,000 (asset account increases)

Cr Unearned Ticket Revenue 450,000 (liability account increases)

C) Since 5 games were played during October, 5/30 of ticket revenue must be recognized. $450,000 x 5/30 = $75,000

October 31. Recognition of ticket revenue (5 games).

Dr Unearned Ticket Revenue 75,000 (liability account decreases)

Cr Ticket Revenue 75,000 (revenue account increases)