Question

Uptown Theatre has customers who prepay a total of $1,000 for season tickets to attend five upcoming shows. Uptown Dinner Theatre collects the $1,000 in advance before the shows are performed. After three shows are performed, what should Uptown Theatre report on its income statement assuming it used the accrual basis accounting method?

Answer 1

Answer:

$600 Revenue

Explanation:

As we see that the total amount received in advance is $1,000 for a total of 5 shows to be conducted.

That means on the basis of equivalent proportion the value of each show = $\frac{1,000}{5} = 200$

Thus, after performing 3 shows revenue shall be recognized for those 3 shows as the service has been performed.

= $200 $\times$ 3 = $600

Thus, total revenue to be shown in income statement after completion of 3 shows = $600, to be recorded based on accrual basis.