Carson Company sells sporting tickets in advance of the event for $500,000.The journal entry to record the sale is:
A)Debit Prepaid Sales $500,000; credit Sales Revenue $500,000.
B)Debit Cash $500,000; credit Accounts Payable $500,000.
C)Debit Cash $500,000,credit Unearned Ticket Revenue $500,000.
D)Debit Cost of Sales $500,000,credit Inventory $500,000.
E)No journal entry is required.

Question

Quizplus · Accepted Answer

The sale of tickets in advance is an example of unearned revenue, which means that the revenue has not yet been earned by the company. Therefore, the journal entry would be to debit Cash (since cash is received) and credit Unearned Ticket Revenue (since the revenue is not yet earned). Option A is incorrect because Prepaid sales is not a proper account name. Option B is incorrect because the sale is not on account, and therefore no accounts payable are involved. Option D is incorrect because no mention of cost of sales or inventory is given in the problem. Option E is incorrect because a journal entry is necessary to record the transaction.

Carson Company Sells Sporting Tickets in Advance of the Event