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5 August, 14:06

Ticketsales, Inc., receives $5,000,000 cash in advance ticket sales for a four-date tour of Bon Jovi. Record the advance ticket sales on October 31. Record the revenue earned for the first concert date of November 5, assuming it represents one-fourth of the advance ticket sales. Ticketsales, Inc. initially records prepaid and unearned items in balance sheet accounts.

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  1. 5 August, 16:42
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    October 31 Cash $5,000,000 Dr

    Unearned ticket Revenue $5,000,000 Cr

    November 5 Unearned ticket revenue $1,250,000 Dr

    Ticket Revenue $1,250,000 Cr

    Explanation:

    The ticket revenue is earned in advance and is not earned yet. Thus, the entry to record the receipt of ticket revenue in advance will increase the cash and cause a debit to the cash account of the total amount of revenue received. The concerts are yet to be done so it is unearned revenue and is a liability for the company. Thus, there will be a credit to unearned ticket revenue for the amount of cash received.

    When the first concert is done, one fourth of the revenue is earned so it will cause a debit to unearned service revenue for 5000000 / 4 = 1250000 and a credit to the service revenue of 1250000
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