French Impressionists is an independent cinema located in Melbourne. The cinema specialises in showing French films. The cinema has experienced extreme financial hardship in terms of profit and cash flow in 2020 and 2021as a result of the lockdown to combat the covid pandemic. Their accountant suggested a strategy for moviegoers to pre-purchase tickets when the cinema is closed during lockdown. He suggests this will improve cash inflow and the tickets can be redeemed (used) when the cinema is open with limited or has full capacity. In late June 2020, French Impressionists placed on its website a contract to honour all pre- purchased cinema tickets. The conditions of sale were detailed including that the tickets must be used by 31 December 2021. The accountant expects that 10% of the pre-purchased tickets will expire without being used. The cost of a ticket was $25 and between July and October 2020 the following tickets were pre-purchased: July 100, August 150, September 60 and October 90. Required: 1. Referring to AASB 15 Revenue from Contracts with Customers, how would you treat the pre-purchased tickets for the month of July 2020? Justify your answer by reference to the 5-steps for revenue recognition. 2. Complete the general journal entry for the pre-purchase tickets for the month of August 2020. A narration is required. 3. By 31 December 2020, 288 tickets had been redeemed (used) when the cinema opened between November and December. Record the journal entry at 31 December 2020 for the 288 tickets used. A narration is required.
French Impressionists is an independent cinema located in Melbourne. The cinema specialises in showing French films.
The cinema has experienced extreme financial hardship in terms of profit and
Their accountant suggested a strategy for moviegoers to pre-purchase tickets when the cinema is closed during lockdown. He suggests this will improve
In late June 2020, French Impressionists placed on its website a contract to honour all pre- purchased cinema tickets. The conditions of sale were detailed including that the tickets must be used by 31 December 2021. The accountant expects that 10% of the pre-purchased tickets will expire without being used.
The cost of a ticket was $25 and between July and October 2020 the following tickets were pre-purchased: July 100, August 150, September 60 and October 90.
Required:
1. Referring to AASB 15 Revenue from Contracts with Customers, how would you treat the pre-purchased tickets for the month of July 2020? Justify your answer by reference to the 5-steps for revenue recognition.
2. Complete the general
3. By 31 December 2020, 288 tickets had been redeemed (used) when the cinema opened between November and December. Record the journal entry at 31 December 2020 for the 288 tickets used. A narration is required.
Step by step
Solved in 3 steps
