Prepare journal entries to record revenue for 20X1 for Posa
Posa Hotels, Inc., has a sixth-night-free policy. Every sixth night a guest stays at the hotel is free. Because not all guests stay enough nights to earn a free stay, on average the number of free nights redeemed is 70% of the maximum possible number of free nights available one obtains by dividing the total number of paid nights the hotel has had by 5. Rooms at Posa Hotels cost $300 per night.
In 20X1, Posa had a total of 100,000 paid room-nights and collected a total of $30 million from customers. Also in 20X1, customers redeemed a total of 10,000 free room-nights. Some of the room-nights awarded were based on customers’ paid nights from previous years and some were based on paid nights from the current year.
Required:
Prepare journal entries to record revenue for 20X1 for Posa. (If no entry is required for a particular transaction, select "No
No Transa General Journal Debit Credit
1 1 Cash (correct) 30,000,000 (correct)
Sales revenue (correct) 25,800,000 (incorrect)
Liability for free rooms (correct) 4,200,000 (incorrect)
2 2 Liability for free rooms (correct) 3,000,000 (incorrect)
Sales revenues (correct) 3,000.000 (incorrect)
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