P2-2. The Golden Goals, a professional soccer team, prepares financial statements on a monthly basis. The soccer season begins in May, but in April the team engaged in the following transactions: a. Paid $1,200,000 to the municipal stadium as advance rent for use of the facilities for the five-month period from May 1 through September 30. This payment was initially recorded as Prepaid Rent.

b. Collected $4,500,000 cash from the sale of season tickets for the team’s home games. The entire amount was initially recorded as Unearned Ticket Revenue. During the month of May the Golden Goals played several home games at which $148,800 of the season tickets sold in April were used by fans.

Requirement

Prepare the two adjusting entries required on May 31

Based on the information given the appropriate journal entries on May 31 are:

Golden Goals journal entries

May 31

Debit Rent expense $240,000

($1,200,000 ÷ 5 months)

Credit  Prepaid rent $240,000

(To record prepaid rent )

May 31

Debit Unearned rent revenue$148,800

Credit Ticket revenue $148,800

(To record unearned revenue )

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Answer and Explanation:

The two adjusting entries are as follows:

On May 31

Rent expense ($1,200,000 ÷ 5 months) $240,000

       To Prepaid rent $240,000

(Being rent expense is recorded)

Here the rent expense is debited as it increased the expenses and credited the prepaid rent as it decreased the assets

On May 31

Unearned rent revenue Dr $148,800

       To Ticket revenue $148,800

(Being unearned revenue is recorded)

Here the unearned rent revenue is debited as it decreased the liability and credited the ticket revenue as it increased the revenue

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