Financial Accounting

Question

Suppose a sports team, with a 10,000 seat arena, sells out the entire season for $200.00 per ticket before the season starts. The team play 50 games:

 

1. Before the first game starts, how much differed revenue is on the team's books?

2. After the 25th game, how much revenue can the team recognize?

3. After the 10th game, how much differed revenue is on the books?

Answer 1

Before the 1st game, it's entirely unearned, so $2,000,000 will be in unearned/deferred revenue.

After the 25th game, 50% would still be unearned (25/50 games). Half of the total could be recognized, ie $1,000,000.

After the 10th game, you can recognize 20% of revenue (10/50). You could recognize $200,000 and the balance would remain unearned. ($2,000,000-200,000=$1,800,000)