A professional sports team sells season tickets prior to the beginning of the season. In the current year, the team sold $500 000 of tickets. At the end of the fiscal year, six of the ten games covered in the season ticket subscription had been played. The amount needed to be adjusted to deferred revenue is:

Question

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The amount of deferred revenue at the end of the fiscal year should reflect the portion of the season that has not yet been played. Since six out of ten games have already been played, the amount of revenue that should be deferred is 6/10 or 60% of the total season ticket revenue. Therefore, the amount needed to be adjusted to deferred revenue is $500 000 x 0.60 = $300 000. Option A is incorrect because it assumes that all of the revenue should be recognized immediately. Option B is incorrect because it assumes that only 40% of the revenue should be deferred, which is not accurate. Option D is incorrect because some revenue should be deferred due to the remaining games left in the season.

A Professional Sports Team Sells Season Tickets Prior to the Beginning