Royal Theater Credited Unearned Revenue of $35,000 for Tickets Sold

question 85

Multiple Choice

Royal Theater credited Unearned Revenue of $35,000 for tickets sold for its season of four plays, which will be presented at the end of one fiscal period and the beginning of the next. As of December 31, the end of their fiscal period, Royal Theater had earned $16,000. The adjusting entry is

• A) debit Cash, $16,000; credit Ticket Income, $16,000.
• B) debit Unearned Revenue, $19,000; credit Ticket Income, $19,000.
• C) debit Unearned Revenue, $16,000; credit Ticket Income, $16,000.
• D) debit Ticket Income, $19,000; credit Unearned Ticket Revenue, $19,000.
• E) debit Cash, $16,000; credit Unearned Ticket Revenue, $16,000.

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Definitions:

Uncollectibles

Debts from customers that are considered impossible to collect and are therefore written off as a loss.

Expense with Revenues

Represents the relationship between the costs incurred and the revenues generated in a specific period.

Direct Write-off Method

An accounting method for treating bad debts that writes off specific invoices as uncollectable only at the time they are deemed irrecoverable.

Allowance Method

An accounting technique used to estimate and account for doubtful accounts, providing a more accurate reflection of realizable revenue.