The realization principle determines when a business should recognize revenue. Listed next are three common business situations involving revenue. After each situation, we give two alternatives as to the accounting period (or periods) in which the business might recognize this revenue. Select the appropriate alternative by applying the realization principle, and explain your reasoning. a. Airline ticket revenue: Most airlines sell tickets well before the scheduled date of the flight. (Period ticket sold; period of flight) b. Sales on account: In June 2011, a San Diego–based furniture store had a big sale, featuring “No payments until 2012.” (Period furniture sold; periods that payments are received from customers) c. Magazine subscriptions revenue: Most magazine publishers sell subscriptions for future delivery of the magazine. (Period subscription sold; periods that magazines are mailed to customers
The realization principle determines when a business should recognize revenue. Listed next are three common business situations involving revenue. After each situation, we give two alternatives as to the accounting period (or periods) in which the business might recognize this revenue. Select the appropriate alternative by applying the realization principle, and explain your reasoning. a. Airline ticket revenue: Most airlines sell tickets well before the scheduled date of the flight. (Period ticket sold; period of flight) b. Sales on account: In June 2011, a San Diego–based furniture store had a big sale, featuring “No payments until 2012.” (Period furniture sold; periods that payments are received from customers) c. Magazine subscriptions revenue: Most magazine publishers sell subscriptions for future delivery of the magazine. (Period subscription sold; periods that magazines are mailed to customers
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter17: Advanced Issues In Revenue Recognition
Section: Chapter Questions
Problem 22E: Each of the following is an independent situation that relates to the recognition of revenue: a....
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The realization principle determines when a business should recognize revenue. Listed next
are three common business situations involving revenue. After each situation, we give two
alternatives as to the accounting period (or periods) in which the business might recognize
this revenue. Select the appropriate alternative by applying the realization principle, and
explain your reasoning.
a. Airline ticket revenue: Most airlines sell tickets well before the scheduled date of the
flight. (Period ticket sold; period of flight)
b. Sales on account: In June 2011, a San Diego–based furniture store had a big sale,
featuring “No payments until 2012.” (Period furniture sold; periods that payments are
received from customers)
c. Magazine subscriptions revenue: Most magazine publishers sell subscriptions for
future delivery of the magazine. (Period subscription sold; periods that magazines are
mailed to customers
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