Question

Ski West, Inc., 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 company’s fiscal year ends on December 31. On November 6, 2021, Jake Lawson purchased a season pass for $450. Required: When should Ski West recognize revenue from the sale of its season passes? Prepare the appropriate journal entries that Ski West would record on November 6 and December 31. What will be included in the Ski West 2021 income statement and balance sheet related to the sale of the season pass to Jake Lawson?

Answer 1

See Explanation Below

Explanation:

a. When should Ski West recognize revenue from the sale of its season passes?

Revenue from the sales of Ski West season should be recognised when it passes each month.

b. Prepare the appropriate journal entries that Ski West would record on November 6 and December 31

November 6, 2021

Cash: ------------------------- $450

Unearned Revenue: --------------------------------- $450

December 31, 2021

Unearned Revenue:--------- $90

Revenue: ---------------------------------------------------$90

c. What will be included in the Ski West 2021 income statement and balance sheet related to the sale of the season pass to Jake Lawson?

2021 Income Revenue

Revenue: ------------------------ $90

Unearned Revenue: --------------------------------$360.

Unearned Revenue is calculated by $450 - $90 = $360