The MRS , professional soccer team, prepares financial statements on a monthly basis. The soccer season begins in May, but in April the team engaged in the following transations.1 paid $1,500,000 to the municipal stadium as abvance rent for use the facilities for the 6 month period from May 1 through October 31. This payment was initially recorded as prepaid rent.2.Collected $6,000,000 cash from sale of season tickets for the tieam's home games. The entire amount was initially played several home games at which $750,000 of the season tickess sold in April were used by fans.I need Prepare the two adjusting entries required on May 31

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Asked Jun 8, 2019
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The MRS , professional soccer team, prepares financial statements on a monthly basis. The soccer season begins in May, but in April the team engaged in the following transations.

1 paid $1,500,000 to the municipal stadium as abvance rent for use the facilities for the 6 month period from May 1 through October 31. This payment was initially recorded as prepaid rent.

2.Collected $6,000,000 cash from sale of season tickets for the tieam's home games. The entire amount was initially played several home games at which $750,000 of the season tickess sold in April were used by fans.

I need Prepare the two adjusting entries required on May 31

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Expert Answer

Step 1

Adjusting Entries:

 

Adjusting entries refers to those journal entries which are prepared at the end of a financial period to adjust the balances for unrecognized income or expenses during the period. Post-trial balance is prepared after passing adjusting entries.

Step 2

Adjusting entry of required on May 31:

 

1)

 

Adjusting entry of rent expired:

 

Prepaid rent is credited as it is an asset and is decreasing because the rent of May is expired. The rent expense account is debited as all the incurred expenses are debited.

 

Working note:

 

Prepaid rent for six months is $1,500,000. Rent expense for the month of May can be calculated shown below:

 

Therefore, rent for the month of May is $250,000.

Post Debit
Credit
Accounts and Explanation
Date
Ref.
(S)
(S)
250000
May-31 Rent expense
Prepaid rent
|(To record the rent expense
for the month of May)
250000
Total prepaid rent
Prepaid rent per month
Duration of rent
$1,500,000
6
= S250,000
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Post Debit Credit Accounts and Explanation Date Ref. (S) (S) 250000 May-31 Rent expense Prepaid rent |(To record the rent expense for the month of May) 250000 Total prepaid rent Prepaid rent per month Duration of rent $1,500,000 6 = S250,000

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Step 3

 

2)

 

Adjusting entry of revenue:

 

Unearned revenue account is debited as $750,000 is the revenue for the month May, and unearned revenue...

Post
Accounts and Explanation
Debit
Credit
Date
(S)
750000
(S)
Ref.
May-31 Uearned ticket revenue
Ticket Revenue
(To record the revemue for
|the month of May)
750000
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Post Accounts and Explanation Debit Credit Date (S) 750000 (S) Ref. May-31 Uearned ticket revenue Ticket Revenue (To record the revemue for |the month of May) 750000

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