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Category > Accounting Posted 10 Jun 2017 My Price 6.00

When American Airlines sells tickets for future flights

When American Airlines sells tickets for future flights, it debits Cash and credits an account entitled Air Traffic Liability (as opposed to crediting Passenger Revenue Earned). This account, reported recently at $4.5 billion, is among the largest liabilities appearing in the company’s balance sheet.

a.       Explain why this liability is often referred to as a deferred revenue account.

b.       What activity normally reduces this liability? Can you think of any other transaction that would also reduce this account?

 

c.        Assume that, in a recent flight, passengers of the airline used tickets that they had purchased in advance for $200,000. Record the entry American Airlines would make upon completion of this flight.

Answers

Alpha Geek
(8)
Status NEW Posted 10 Jun 2017 07:06 AM My Price 6.00

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Attachments

file 1497079264-1322979_1_636326030328711109_Deferred-Revenue.xlsx preview (222 words )
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