Question

Northern Hockey Team uses accrual accounting. On October 1, 2020, the team collects $5,000 cash in...

Northern Hockey Team uses accrual accounting. On October 1, 2020, the team collects $5,000 cash in advance ticket sales to scheduled hockey games. If $1,000 of hockey games are played during October 2020, what is the adjusted balance of the Unearned Revenue account at October 31, 2020?

$4,000

$1,000

$0

$6,000

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Answer #1

In accrual accounting the revenues are recorded for the period in which they are earned rather than when they are recieved in cash

On oct 1 the team collects cash of $5000 for advance ticket sales

But only $1000 of the hockey game are played during october

So as per the accrual accounting the remaining $4000 should only be recorded as revenue when it is earned

So the $4000 will become unearned revenue as per the accrual accounting method and will only be recognised as revenue when it is earned(Meaning that when the obligation(services or product) is satisfied)

So at oct 31 2020 the adjsuted balance of unearned revenue account will be

Option 1. $4000

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