The Beginnings of Disco World Dance Lessons

What happened on November 1 at Disco World?

How much did the dance lessons cost per person?

How many students bought contracts for the dance lessons?

Disco World Transaction on November 1

On November 1, Disco World began its business by selling dance lesson contracts to twelve students. Each student purchased a contract for dance lessons that cost $375 per person for a three-month period.

Disco World initiated its business operations on November 1 by offering dance lesson contracts to students. These contracts were priced at $375 per person for a three-month period, requiring students to pay in advance for the lessons.

Twelve students took advantage of the opportunity and purchased contracts for the dance lessons on that day. This allowed Disco World to generate revenue upfront for the lessons they would provide over the upcoming three months.

The transaction recorded in the journal entry for this sale would include a debit to cash for the receipt of payment from the students on November 1. The credit entry would be made to the unearned revenue account, reflecting the liability created by receiving payment in advance for services yet to be provided.

As the students attend their dance lessons over the next three months, Disco World will recognize the revenue earned from those lessons and gradually reduce the unearned revenue liability. This process will involve adjusting entries at the end of each accounting period to accurately reflect the real-time revenue recognition.