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College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570

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BuyFindarrow_forward

College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570
Textbook Problem

On October 31, the Vermillion Igloos Hockey Club received $800,000 in cash in advance for season tickets for eight home games. The transaction was recorded as a debit to Cash and a credit to Unearned Admissions. By December 31, the end of the fiscal year, the team had played three home games and received an additional $450,000 cash admissions income at the gate.

  1. a. Journalize the adjusting entry as of December 31.
  2. b. List the title of the account and the related balance that will appear on the income statement.
  3. c. List the title of the account and the related balance that will appear on the balance sheet.

a.

To determine

Journalize the adjusting entry for the year ended 31st December.

Explanation

Adjusting entries: Adjusting entries are those entries which are recorded at the end of the year, to update the income statement accounts (revenue and expenses) and balance sheet accounts (assets, liabilities, and stockholders’ equity) to maintain the records according to accrual basis principle.

Journalize the adjusting entry.

Date Account Title and explanation Debit ($) Credit ($)
20— 31 Unearned Admissions (Woking Note) 300,000  
December   Admission Income   300,000
    (To record the admission earned)    

Table (1)

  • Unearned admission is a liability account and it is decreased. Therefore, debit the unearned admission.
  • Admission income is a revenue account and it is increased. Therefore, credit the admission income.

Note:

  • The V Hockey club has received $800,000 as cash advance for eight home games (for season tickets).
  • By end of the fiscal year, team had played three home games, so $300,000 is obtained.

Working Note:

Step 1: Calculate the cash advance provided for each home game...

b.

To determine

List the title of the account and the balance that will appear on the income statement.

c.

To determine

List the title of the account and the balance that will appear on the balance sheet.

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