Hi there,

Learning about journalizing transactions. Question is if a park sold coupon books which gave the holder admission to the park (eg 100 coupon books for $75 each - books contain 10 coupons for one admission each)... I am debiting the "cash" account and crediting "unearned admissions revenue" each for $7500.00 but I am wondering why the question is mentioning that there are 10 coupons per book... just to confuse or is there some other entry to be made here? :)

Thanks!

I can think of two reasons for that information. One would be for an adjusting entry that needs done later. i.e. everyone uses 2 of the 10 tickets, so the company has earned 2/10 of the total amount. But that seems a little weird, cause why would everyone use the same number of tickets? The other would be if part of this revenue is actually already earned. For instance, if the coupon books are sold at the time they buy their first ticket, meaning everyone would be using that first ticket, making 1/10 revenue and 9/10 unearned. But that seems a little weird too.

Are you leaving anything out?

Well, we're actually only on chapter 2 of an intro to financial accounting course so we haven't even done adjusting entries as yet (that's in chapter 3 :)).
The first portion states that the Park sold the 100 coupon books at $75 each and that each book contains 10 coupons that give the holder one admission to the park. Then there are a couple of unrelated transactions after that and then the last one is "Counted the coupons that had been redeemed since June 25 (the park opened on June 1st and the transactions are all for June) - found that 80 coupons has been used in exchange for admission to the park.
I re-read the whole chapter and can't seen anywhere that these 80 used coupons are relevant...

Well, you actually do have an adjusting entry involved -- they just aren't calling it that. Just like many texts have you do the entry to expense used up supplies, which is also an adjusting entry and they don't call it that. Then Ch. 3 (yes, it's usually 3) goes into more detail about adjusting entries.

The purpose of the 10 coupons is that you have to know the dollar worth of them. $75 per book of coupons and there's 10 coupons in each. i.e. $7.50 per coupon.

Think about what unearned revenue is. It's something that has been paid in advance to the company, but the company has not earned it yet. Hence, it's a liability account because they have an obligation -- in this case to allow people into the park. At the end of June, they have redeemed 80 coupons and therefore have earned 80 coupons worth of income. So it's no longer "unearned" and no longer a liability. So it has to come out of the unearned account and then credited to the earnings account, I assume Admissions Revenue.

That's a little odd to do something like that before getting to adjusting entries, but there it is. And now you have a jump-start on Ch. 3.