Discuss when each of the following types of businesses is likely to recognize revenues and expenses.
9.14 Income Recognition for Various Types of Businesses. Discuss
when each of the following types of businesses is likely to recognize revenues and expenses.
1. A major league baseball team sells season tickets before the season begins and signs its players to multiyear contracts. These contracts typically defer the payment of a significant portion of the compensation provided by the contract until the player retires.
2. A producer of fine whiskey ages the whiskey 12 years before sale.
3. A timber-growing firm contracts to sell all timber in a particular tract when it reaches 20 years of age. Each year it harvests another tract. The price per board foot of timber equals the market price when the customer signs the purchase contract plus 10% for each year until harvest.
4. An airline provides transportation services to customers. Each flight grants frequentflier miles to customers. Customers earn a free flight when they accumulate sufficient frequent-flier miles.
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