Asked by Doris Mansueto on May 12, 2024
Verified
A company receives $6,500 for two season tickets sold on September 1. If $2,500 is earned by December 31, the adjusting entry made at that time is a debit to Cash, $2,500, and a credit to Ticket Revenue, $2,500.
Adjusting Entry
Journal entries made at the end of an accounting period to allocate income and expenditure to the period in which they actually occurred.
Unearned Revenue
Money received by a company for goods or services yet to be delivered or performed, considered a liability until the obligation is fulfilled.
Ticket Revenue
Income generated from the sale of tickets, commonly associated with events, performances, transport services, or attractions.
- Understand the basics of adjusting entries and their impact on financial statements.
- Identify the types and purposes of adjusting entries in accounting (accrued revenues, accrued expenses, deferred revenues, prepaid expenses).
- Recognise the role and impact of errors in adjusting entries on financial statements.
Verified Answer
BP
Bailey ParksMay 18, 2024
Final Answer :
False
Explanation :
The adjusting entry would be a debit to Unearned Ticket Revenue, $4,000 and a credit to Ticket Revenue, $4,000. This is because only $2,500 has been earned by December 31, meaning the remaining $4,000 is still unearned and should be recorded as a liability (Unearned Ticket Revenue) until the games are played.
Learning Objectives
- Understand the basics of adjusting entries and their impact on financial statements.
- Identify the types and purposes of adjusting entries in accounting (accrued revenues, accrued expenses, deferred revenues, prepaid expenses).
- Recognise the role and impact of errors in adjusting entries on financial statements.