
Accounting 26th Edition by Carl Warren ,Jim Reeve ,Jonathan Duchac
Edition 26ISBN: 978-1337498159
Accounting 26th Edition by Carl Warren ,Jim Reeve ,Jonathan Duchac
Edition 26ISBN: 978-1337498159 Exercise 9
Accrued revenue
The following is an excerpt from a conversation between Sonia Lopez and Pete Lemke just before they boarded a flight to Paris on Delta Air Lines. They are going to Paris to attend their company's annual sales conference.
Sonia: Pete, aren't you taking an introductory accounting course at college
Pete: Yes, I decided it's about time I learned something about accounting. You know, our annual bonuses are based on the sales figures that come from the accounting department.
Sonia: I guess I never really thought about it.
Pete: You should think about it! Last year, I placed a $5,000,000 order on December 30. But when I got my bonus, the $5,000,000 sale wasn't included. They said it hadn't been shipped until January 9, so it would have to count in next year's bonus.
Sonia: A real bummer!
Pete: Right! I was counting on that bonus including the $5,000,000 sale.
Sonia: Did you complain
Pete: Yes, but it didn't do any good. Julie, the head accountant, said something about matching revenues and expenses. Also, something about not recording revenues until the sale is final. I figure I'd take the accounting course and find out whether she's just messing with me.
Sonia: I never really thought about it. When do you think Delta Air Lines will record its revenues from this flight
Pete: Hmmm … I guess it could record the revenue when it sells the ticket … or … when the boarding passes are scanned at the door … or … when we get off the plane … or when our company pays for the tickets … or … I don't know. I'll ask my accounting instructor.
Discuss when Delta Air Lines should recognize the revenue from ticket sales to properly match revenues and expenses.
The following is an excerpt from a conversation between Sonia Lopez and Pete Lemke just before they boarded a flight to Paris on Delta Air Lines. They are going to Paris to attend their company's annual sales conference.
Sonia: Pete, aren't you taking an introductory accounting course at college
Pete: Yes, I decided it's about time I learned something about accounting. You know, our annual bonuses are based on the sales figures that come from the accounting department.
Sonia: I guess I never really thought about it.
Pete: You should think about it! Last year, I placed a $5,000,000 order on December 30. But when I got my bonus, the $5,000,000 sale wasn't included. They said it hadn't been shipped until January 9, so it would have to count in next year's bonus.
Sonia: A real bummer!
Pete: Right! I was counting on that bonus including the $5,000,000 sale.
Sonia: Did you complain
Pete: Yes, but it didn't do any good. Julie, the head accountant, said something about matching revenues and expenses. Also, something about not recording revenues until the sale is final. I figure I'd take the accounting course and find out whether she's just messing with me.
Sonia: I never really thought about it. When do you think Delta Air Lines will record its revenues from this flight
Pete: Hmmm … I guess it could record the revenue when it sells the ticket … or … when the boarding passes are scanned at the door … or … when we get off the plane … or when our company pays for the tickets … or … I don't know. I'll ask my accounting instructor.
Discuss when Delta Air Lines should recognize the revenue from ticket sales to properly match revenues and expenses.
Explanation
The Facts of the given case are as below...
Accounting 26th Edition by Carl Warren ,Jim Reeve ,Jonathan Duchac
Why don’t you like this exercise?
Other Minimum 8 character and maximum 255 character
Character 255