"A theater sells a subscription series that allows patrons to attend all 8 of its productions that occur monthly from October through May. During August and September, the theater sold 1,000 subscriptions for the 2010-2011 season at $ 80 each and collected cash. How much revenue from these subscriptions should the theater recognize in its financial statements for the year ended December 31, 2010?"
Answered on
To recognize revenue, the theater needs to consider the portion of the subscription series that corresponds to the period ending on December 31, 2010. Since the productions start in October and end in May, by the end of December, only three productions have occurred (October, November, and December).
If the theater sold 1,000 subscriptions at $80 each for the entire season and recognizes revenue based on the number of productions, the revenue from the subscriptions for the three productions by December 31, 2010, would be:
Total revenue from 1,000 subscriptions = 1,000 subscriptions * $80 = $80,000
Revenue for three productions = (3/8) * $80,000 = $30,000
Therefore, the theater should recognize $30,000 in revenue from these subscriptions in its financial statements for the year ended December 31, 2010.