Business, 21.02.2020 02:23 coontcakes

The following independent situations require professional judgment for determining when to recognize revenue from the transactions. Identity when revenue should be recognized in each of the situations. (a) Southwest Airlines sells you an advance purchase airline ticket in September for your flight home in December.(b) Ultimate Electronics sells you a home theater on a "no money down and full payment in three months' promotional deal.(c) The Toronto Blue lays sell season tickets online to games in the Skydome. Fans can purchase the tickets at any time, although the season doesn't officially begin until April. The major league baseball season runs from April through October.(d) You borrow money in August from RBC Financial Group. The loan and the interest are repayable in full in November.(e) In August, you order a sweater from Seats using its online catalog. The sweater arrives in September, which you charged to your Sears credit card. You receive and pay the Sears bill in October.

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Answer from: bryannnnv

Explanation:

(a) Southwest Airlines sells you an advance purchase airline ticket in September for your flight home in December.

Southwest Airlines can only recognize revenue on this transaction when it is earned in December not when it is paid for in September.

(b) Ultimate Electronics sells you a home theater on a "no money down and full payment in three months' promotional deal.

Ultimate Electronics should recognize revenue on this transaction NOW when it is earned not when it is paid for in 3 months.

(c) The Toronto Blue lays sell season tickets online to games in the Skydome. Fans can purchase the tickets at any time, although the season doesn't officially begin until April. The major league baseball season runs from April through October.

Toronto Blue should recognize revenue on this transaction monthly beginning from April through October because it is earned through the season,not when it is paid for. Hence we divide the total sales by 7 months and recognize 1/7 of the total amount each month

(d) You borrow money in August from RBC Financial Group. The loan and the interest are repayable in full in November.

RBC Financial Group does not need to wait till November to recognize the interest in FULL but recognize the earning of the interest monthly through August to November by apportioning the interest amount into 4 months

(e) In August, you order a sweater from Seats using its online catalog. The sweater arrives in September, which you charged to your Sears credit card. You receive and pay the Sears bill in October.

Sears should recognize the revenue upon the consummation of the transaction in August

Answer from: Quest

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Answer from: Quest

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