Rock N Roll produces an outdoor concert festival that runs from June 28, 2010, t

Question

Rock N Roll produces an outdoor concert festival that runs from June 28, 2010, through July 1, 2010. Concertgoers pay $80 for a four-day pass to the festival, and all 10,000 tickets are sold out by the May 1, 2010, deadline to buy tickets. Assume that Rock N Roll prepares adjustments at the end of each month. Required 1. Identify and analyze the transaction on May 1, 2010, assuming that all 10,000 tickets are sold on this date. 2. Identify and analyze the adjustment on June 30, 2010. 3. Identify and analyze the adjustment on July 31, 2010.

Explanation / Answer

Ans 1.10000 tickets are sold at $80 this means Rock N Roll has received cash of $800000. So there is a four day concert so there will be revenue and that revenue is received in advance on may 1, 2010. So there is receipt of cash and selling of tickets in advance.So cash will affect balance sheet and the revenue is received for future so it is Deferred revenue not recognised in income statement, for the time being its a liability because if the event cancels than the company has to pay it back. The entry is

Cash a/c Dr $800000

Deferred revenue from Concert $800000

2) On June 30,2013 the event has taken place so now the revenue will be recognized in the income statement and deferred revenue will be transferred to revenue. the event is for 4 days but 3 days in this month and 1 day in July. So for three day pass it is $60

Deferred Revenue from Concert a/c Dr $600000

Revenue from Concert a/c $600000

3) Event lasted till July 1,2010 so one day revenue will be booked here which is $20 for each ticket. so now the revenue will be recognized in the income statement and deferred revenue will be transferred to revenue.

Deferred Revenue from Concert a/c Dr $200000

Revenue from Concert a/c $200000

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