Big Time University has a football stadium that seats up to 80,000 fans. Details include: Six home games each year. Season passes are sold for $400 each. All 60,000 season passes are sold over the period January through August (prior to the season). Cash is received at the time of the sale. The six home games consist of two in September, three in October, and one in November.

As the new Assistant Athletic Director, you are preparing the football budget for the upcoming season. To assist in that preparation you have assembled data regarding the past season. The bar graphs show the total cash received from season pass sales and sales revenue recognized by the university each month. The line graph plots the balance of the Deferred Revenue account over the year.

Required:
a. In which month were the most season passes sold?
b. In which month was the most sales revenue recognized?
c. Based on the graph, which statement best summarizes when revenue is recognized?
d. What happens to the balance of Deferred Revenue when cash is received for a season pass prior to the season?
e. What is the total amount of Deferred Revenue by the end of August once all 60,000 season passes are sold for $400 each?
f. What happens to the balance of Deferred Revenue when games are played?
g. What will be the balance of Deferred Revenue after the final home game is played in November?

a. Note that from the graph we could observe that in the month of April we have the highest peak in the hight of the bar, which indicates that most season passes were sold in this month from January through August (prior to the season).

b. The month of October saw the most sales revenue recognized since we could also observe the highest peak in the hight of revenue here.

c. It indicates that when there are more home games in a month it results in more revenue been recognized since only October had three home games.

d. From the balance of Deferred Revenue when cash is received for a season pass prior to the season we notice an increase in the balance starting from January through August.

e. $25,000,000

f. We could notice a continuous decrease in the balance starting from the month of September when games are played.

g. $0, which is evident in the month of November to December.

anthougo anthougo · Answer 2 · 2021-10-29T21:50:49+02:00

a. The month in which the most season passes were sold is April. About 18,750 season passes are sold with a revenue of $7.5 million.

b. The month in which the most sales revenue was recognized is October. About $12.5 million is recognized in October alone.

c. The graph shows that revenue is recognized only in September, October, and November when the home games are played.

d. The balance of the Deferred Revenue account continues to increase as cash is received before the home games.

e. By the end of August, the Deferred Revenue is $24 million (60,000 x $400).

f. When games are played, the balance of Deferred Revenue reduces.

g. The balance of the Deferred Revenue after the final home game is played in November is $0 (zero).

Data and Calculations:

Seating capacity of stadium = 80,000

Number of home games each year = 6

Price per Season Pass = $400

Number of season passes sold between January and August = 60,000

September home games = 2

October home games = 3

November home game = 1

Thus, this graph shows how the receipt of cash from January to August, the recognition of Sales Revenue in September, October, and November, and finally how the Deferred Revenue account is maintained in line with the accrual concept of generally accepted accounting principles.

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