Question

Ch. 5 Income Measurement and Profitability Analysis (4 marks) Alpine West Ltd, operates a dowahil ki area near Lake Tahoe, Califoria. An al day, adult ticket can be purchased for $55. Adult ustomers also can purchase a season pas that entitles the passholder to ski any day during the season, which typically rns from December 1 through April 30. The season passis nontransferable, and the $450 price is nonrefundable. Alpine expects its season pass olders to use their passes equaly throughout the season. The company's financial year ends on December 31 On November 6,2013,Jake Lawson purchased a season ticket Required: 1. When should Alpine West recognize revenue from the sale of is season passes? 2. Prepare the appropriate journal entries that Alpine would record on November 6 and December 31. 3. What will be included in the 2013 income statement and 2013 tatement of financial position related to the sale of the season pass to Jake Lawson? E 5-1 Service reveaue L01

Answer 1

E5-1 Alpine West Ltd

1. Alpine West should recognize revenue from the sale of its season passes on a straight-line basis every month over the 5 month period of the ski season beginning from December 1 through April 30.

2.

Date	General Journal	Debit	Credit
November 6, 2013	Cash	450
	Unearned revenue		450
	(To record the sale of the season pass)
December 31, 2013	Unearned revenue	90
	Service revenue ($450 x 1/5)		90
	(To record revenue earned)

3.

Alpine West Ltd.
Income Statement (Partial)
For the Year Ended December 31, 2013
Revenue:
Service revenue	90
Alpine West Ltd.
Balance Sheet (Partial)
December 31, 2013
Current Assets:
Cash	450
Current Liabilities:
Unearned revenue	360

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