Kirkland sells season tickets for six events at a price of $48. For the 2013 season, 2,700 season tickets were sold. Required:
a. Use the horizontal model to show the effect of the sale of the season tickets. (Enter decreases to account balances with a minus sign.)
b. Use the horizontal model (or write the journal entry) to show the effect of presenting an event.
c. Where on the balance sheet would the account balance representing funds received for performances not yet presented be classified?

a. Assets = Liabilities + Stockholders' Equity = $129,600

b. Debit Unearned ticket revenue for $129,600, and Credit Total revenue for $129,600.

c. It would be classified as an Unearned ticket revenue under the Current Liabilities on the balance sheet.

Explanation:

a. Use the horizontal model to show the effect of the sale of the season tickets. (Enter decreases to account balances with a minus sign.)

Note: See the attached excel file for the horizontal model showing the effect of the sale of the season tickets.

In the attached excel file, the following calculation is done:

Cash = Unearned ticket revenue = Price per season ticket * Number of season tickets sold = $48 * 2,700 = $129,600

Since Stockholders' Equity is equal to zero in the attached excel file, we have:

Assets = Liabilities + Stockholders' Equity = $129,600

b. Use the horizontal model (or write the journal entry) to show the effect of presenting an event.

The journal entry will look as follows:

General Journal                          Debit ($)              Credit ($)    

Unearned ticket revenue            129,600

Total revenue                                                             129,600

(To record the effect of presenting an event.)                            

c. Where on the balance sheet would the account balance representing funds received for performances not yet presented be classified?

It would be classified as an Unearned ticket revenue under the Current Liabilities on the balance sheet.

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