Club Med, Inc., operates Club Med resorts in the United States, Mexico, the Caribbean, Asia, the South Pacific, and the Indian Ocean Basin. Club Med routinely receives payment in advance from vacationers. In some countries, Club Med is required by law to deposit cash received as payment for future vacations in special accounts. Cash in these accounts is restricted as to its use. Assume that on December 31 Club Med received cash totaling $6,000,000 as payment in advance for vacations at one of its resorts. The resort is in a country that requires that the cash be deposited in a special account.
1. Prepare the journal entry necessary to record receipt of the $6,000,000.
2. Explain how the $6,000,000 would be disclosed in the December 31 balance sheet.