Consider that Southwest Airlines sells a plane ticket on October 1st to New Hampshire for $300 that will be used on November 1st. The journal entry from Southwest Airlines perspective is as follows: Oct. 1 Cash 300 Unearned Revenue 300 This would record revenue received in advance. On November 1st, when the customer actually flies to New Hampshire the obligation will have been fulfilled. Nov. 1 Unearned Revenue 300 Service Revenue 300 This would record revenue earned. Question 1: Discuss the status of the accounts affected prior to the adjustment (understated or overstated), and explain the impact of the adjustment on the financial statements.
Consider that Southwest Airlines sells a plane ticket on October 1st to New Hampshire for $300 that will be used on November 1st. The
Oct. 1 Cash 300
Unearned Revenue 300
This would record revenue received in advance.
On November 1st, when the customer actually flies to New Hampshire the obligation will have been fulfilled.
Nov. 1 Unearned Revenue 300
Service Revenue 300
This would record revenue earned.
Question 1:
Discuss the status of the accounts affected prior to the adjustment (understated or overstated), and explain the impact of the adjustment on the financial statements.
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