1. Magic Mountain accounts for revenues using the contract-based approach. It operates a ski resort. Ski Season tickets are sold throughout the year, and entitle the holder to ski any day all season long. They are non-refundable. When should Magic Mountain recognize revenue for the season tickets?

a. at the time of sale

b. on the day the mountain first opens for skiing

c. throughout the ski season

d. at the end of the ski season

2. Frenzo Furniture Co. is a manufacturer of specialty furniture, and uses the contract-based approach for revenue recognition. Because each piece of furniture is custom manufactured, the company requires a contract prior to beginning the production process. Contract terms include a payment of 40% of the estimated cost of the finished piece before production begins. Frenzo Furniture Co. should record the collection as a

a. credit to sales revenue

b. credit to unearned revenue

c. credit to inventory

d. credit to cost of goods sold

Please include a brief explanation for the chosen answer for each question.