Calculate earned revenues Kirkland Theater sells season tickets for six events at a price of $180. In pricing the tickets, the planners assigned the leadoff event a value of $45 because the program was an expensive symphony orchestra. The last five events were priced equally; 1,500 season tickets were sold for the 2016 season.Required:a. Calculate the theater’s earned revenue after the first three events have been presented.b. About 95% of the season ticket holders attended the first event. Subsequent events were attended by about 80% of the season ticket holders. To what extent, if any, should the attendance data impact revenue recognition? Explain your answer.

Question
Asked Jul 25, 2019
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Calculate earned revenues Kirkland Theater sells season tickets for six events at a price of $180. In pricing the tickets, the planners assigned the leadoff event a value of $45 because the program was an expensive symphony orchestra. The last five events were priced equally; 1,500 season tickets were sold for the 2016 season.
Required:
a. Calculate the theater’s earned revenue after the first three events have been presented.
b. About 95% of the season ticket holders attended the first event. Subsequent events were attended by about 80% of the season ticket holders. To what extent, if any, should the attendance data impact revenue recognition? Explain your answer.

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Expert Answer

Step 1

Revenue is the amount that a company earns from normal activities conducted by the business for example: revenue from sales of goods and services, interest received, royalties received etc. Revenue recognition is one of the principles of accounting that determines the revenue and expenses recognized in a particular period.

Step 2

a. Given:

Total price of the tickets for 6 events= $180

First event’s ticket price= $45

Number of season tickets sold= 1500

Calculation for revenue earned:

Revenue earned after first event’s tickets are sold= $45 × 1500

                                                                                                                      = $67,500

Revenue earned after second event’s tickets are sold= $27 × 1500

                                                                                                                = $40,500

Revenue earned after third event’s tickets are sold= $27 × 1500

                                                                                 = $40,500

Theatre’s total revenue after first three events= $67,500 + $40,500 + $40,500

                                                                                                        = $148,500

Equal price per ticket has been allotted to the remaining 5 events
$180-$45
Price per remaining event =
5
$27
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Equal price per ticket has been allotted to the remaining 5 events $180-$45 Price per remaining event = 5 $27

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Step 3

b. It makes no difference in the revenue recognition even if only 95% of the people attended the first event and 80% attended the subsequent events as the company sold the tickets in advance. Th...

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