ski west, incorporated, operates a downhill ski area near lake tahoe, california. an all - day adult lift…

ski west, incorporated, operates a downhill ski area near lake tahoe, california. an all - day adult lift ticket can be purchased for $85. adult customers also can purchase a season pass that entitles the pass holder to ski any day 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 companys fiscal year ends on december 31. on november 6, 2024, ski west sells a season pass to jake lawson for $450. required: 1. when should ski west recognize revenue from the sale of its season passes? 2. what are the financial statement effects from the sale of the season pass on november 6, 2024? 3. what will be included in ski wests 2024 income statement and balance sheet related to the sale of the season pass to jake lawson? complete this question by entering your answers in the tabs below. required 1 required 2 required 3 what will be included in ski wests 2024 income statement and balance sheet related to the sale of the season pass to jake lawson? amount included in revenue amount remaining balance in deferred revenue

ski west, incorporated, operates a downhill ski area near lake tahoe, california. an all - day adult lift ticket can be purchased for $85. adult customers also can purchase a season pass that entitles the pass holder to ski any day 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 companys fiscal year ends on december 31. on november 6, 2024, ski west sells a season pass to jake lawson for $450. required: 1. when should ski west recognize revenue from the sale of its season passes? 2. what are the financial statement effects from the sale of the season pass on november 6, 2024? 3. what will be included in ski wests 2024 income statement and balance sheet related to the sale of the season pass to jake lawson? complete this question by entering your answers in the tabs below. required 1 required 2 required 3 what will be included in ski wests 2024 income statement and balance sheet related to the sale of the season pass to jake lawson? amount included in revenue amount remaining balance in deferred revenue

Answer

Brief Explanations:

  1. Revenue from season - pass sales should be recognized over the ski - season (December 1 - April 30) as the company provides the service of allowing pass - holders to ski. This is in line with the revenue recognition principle which states that revenue should be recognized when the performance obligation is satisfied.
  2. On November 6, 2024, when the season pass is sold, there is a debit to Cash for $450 and a credit to Deferred Revenue for $450. This is because the company has received cash but has not yet satisfied its performance obligation of providing ski - access throughout the season.
  3. In the 2024 income statement, the revenue recognized will be for the portion of the season that has passed by December 31. The ski - season is 5 months long (December 1 - April 30). From December 1 - December 31 is 1 month. So the revenue recognized in 2024 is $\frac{450}{5}=90$. The remaining balance in deferred revenue in the 2024 balance sheet is $450 - 90=360$.

Answer:

  1. Revenue should be recognized over the ski - season (December 1 - April 30).
  2. Debit Cash $450, Credit Deferred Revenue $450.
    • Income statement: Revenue of $90.
    • Balance sheet: Deferred revenue of $360.