A local tennis club sells season memberships for $1,000 each. During January 2019, 50 season memberships were sold. As of March 31, 2019, only $25,000 of season membership fees had been collected from customers. The tennis season runs for 6 months starting April 01, 2019. Which one of the following is an amount reported on the Balance Sheet dated March 31, 2019?

Question

Quizplus · Accepted Answer

As of March 31, 2019, only $25,000 of season membership fees had been collected from customers even though 50 season memberships were sold. This means that the remaining $50,000 ($1,000 x 50) is unearned revenue, since the tennis season has not started yet. Therefore, choice A is correct as it reflects the unearned tennis membership revenue of $25,000 on the balance sheet. Choices C and D are incorrect because there are no accounts receivable or tennis membership revenue to be recognized as of March 31, 2019, since the tennis season has not started yet. Choice B is incorrect because the total unearned revenue as of March 31, 2019 is only $25,000, not $50,000.

A Local Tennis Club Sells Season Memberships for $1,000 Each