Disco World began its business on November 1 and sold contracts to twelve students for dance lessons that day.The lessons cost $375 per person for a three-month period and the students are required to pay in advance. Assuming Disco World adjusts its accounts only at its December 31 year-end,what entry must Disco World make to account for the services provided through that date?
A)Debit Cash and credit Dance Lessons Revenue for $3,000.
B)Debit Deferred Revenue and credit Dance Lessons Revenue for $4,500.
C)Debit Deferred Revenue and credit Dance Lessons Revenue for $3,000.
D)Debit Dance Lessons Revenue and credit Deferred Revenue for $3,000.

Question

Quizplus · Accepted Answer

Debit Deferred Revenue (to decrease that liability account)and credit Dance Lessons Revenue for $3,000 (or 12 students × $375 student × (2 months ÷ 3 months)).

Disco World Began Its Business on November 1 and Sold