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M inbox (1,280), rr ! Spiceland4e-E01Spiceland4e-E02 | Chapter 3G × tpx e favorites here, select then , and drag to the Favorites Bar folder. Or import from another browser. Import favorites Consider the following shuations For each sibuation, determine the date for which the company recognizes the revenue under accrual- basis accounting 1. American Airlines collects cash on June 12 from the sale of a ticket to a customer. The flight occurs on August 16 .ane 12 August 6 O January 27 O February 2 March 30 th subscription to Sports Mustrated on July 1 Issues are scheduled for delivery each week from July 1 through September 30 O September 30 O Revenue would be 0 rch

Solution

Revenue Recognition: A company records its revenue when it sells a product or provides its services

American Airlines collects cash on June 12 from the sale of a ticket to a customer. The flight occurs on August 16.

Ans. August 16, Flight is running on August 16 and services performed will be completed only on August 16.

A customer purchases sunglasses from Eddie Bauer on January 27 on account. Eddie Bauer receives payment from the customer on February 2.

Ans. January 27, Sales is deemed to be completed if goods is delivered and it is reasonably estimated that payment will be received, so January 27 will be date of revenue recognition.

On March 30, a customer preorders 10 supreme pizzas (without onions) from Pizza Hut for a birthday party. The pizzas are prepared and delivered on April 2. The company receives cash at the time of delivery.

Ans. April 2, Pizza is delivered and payment is collected on April 2, so April 2 will be date of revenue recognition.

A customer pays in advance for a three-month subscription to Sports Illustrated on July 1. Issues are scheduled for delivery each week from July 1 through September 30.

Ans. Revenue would be recognized as each magazine is delivered. Date of delivery is different so revenue would be recognized on different point of time.