E 52 Service revenue Ski West Inc operates a downhill ski ar

E 5-2 Service revenue Ski West, Inc, operates a downhill ski area near Lake Tahoe, California. An all-day adult lift ticket can be purchased for $85. A during the season, which typically runs from December 1 through April 30. Ski West expects its season pass holders to use their passes equally throughout the season. The company\'s fiscal year ends on December 31. dult customers also can purchase a season pass that entitles the pass holder to ski any day On November 6, 2018, Jake Lawson purchased a season pass for $450. Required: 1. When should Ski West recognize revenue from the sale of its season passes? 2. Prepare the appropriate journal entries that Ski West would record on November 6 and December 31, 3. What will be included in the Ski West 2018 income statement and balance sheet related to the sale of the season pass to Jake Lawson? E 5-3 Allocating transaction price LO5-4

Solution

1.SKi west should recoginise revenue from sale of season pass evenly through December 1 through April 30.

This is because, revenue must be matched with the period during which services are actually provided.

2.the following are the journal entries:

3.

november 6	Cash a/c	$450
	............To unearned service revenue a/c	.	$450
	(this is because unearned service revenue is credited when cash is received for services yet to be provided)
december 31	unearned service revenue a/c	$112.50
	............To service revenue a/c		$112.50
	(amount = $450,/ 4 months =>$112.50) (montly amount is debited from unearned revenue and credited to service revenue)