Question

When does Carnival Cruise Lines recognize revenues and expenses for its cruises? Carnival Cruise Lines had a record-breaking month in January 2019 in terms of number of net bookings (new bookings less cancellations.) During January 2019, Carnival booked more than 565,000 (net) guests for cruises to be taken over the next two years. Part of the reason that Carnival may be seeing increased bookings is its new LIVE concert series which features performances by many top artists, including Jennifer Hudson, Gavin DeGraw, Lady Antebellum. Daughtry. Martina McBride, Jewel, and others. Questions 1. Assume that on January 10, 2019, Kerrie Collins booked a four-day cruise for June 2020 to Western Caribbean for a total of $1,958 (not including taxes, fees, or port expenses.) The customer pays in full on the day she books. What journal entry will Carnival make on January 10, 2019, for the Kerrie Collins booking and payment? 2. When (what month/year) does Carnival recognize the revenue from Kerrie Collins cruise? What journal entry would Carnival make when it recognizes the revenue from Kerrie Collins' cruise? 3. Now assume that Carnival booked Lady Antebellum in January 2019 to perform on the June 2020 Western Caribbean cruise. Further assume that Carnival pays Lady Antebellum its entire performance fee of $52,000 on January 15, 2019, for the June 2020 cruise. What journal entry will Carnival make on January 15, 2019, for its payment to Lady Antebellum? 4. When (what month/year) would Carnival expense the payment to Lady Antebellum? What journal entry would Carnival make when it recognizes the Lady Antebellum expense?

Answer 1

In the books of Carnival Cruise Line
Journal
Entry 1: at the time of receipt of advance amount from customer for next year performance in cruise
Date	Particulars	Debit Amount	Credit Amount
		$	$
10th Jan 2019	Cash/Bank Account	1958
	Kerrie Collins Account		1958
	(Being advance amount received in jan 2019 for June 2020's Program)
Entry 2: Recogonition of revenue by the Carnival cruise lines in their books of account.
AS – 9 has said that revenue to be considered only when service is completed.So the revenue will be recogonised in the books in June 2020
Date	Particulars	Debit Amount	Credit Amount
		$	$
Jun-20	Kerrie Collins Account	1958
	Revenue from bookings		1958
	(Advance amount received in 2019 recogonised in the books in current year)
Entry 3: Advance payment to Lady Antebellum during the month of January 2019 for the performance in June 2020
Date	Particulars	Debit Amount	Credit Amount
		$	$
Jan-19	Advance for Performance	52000
	Cash/Bank Account		52000
	(Advance amount paid to Lady Antebellum in January 2019 for the performance in June 2020)
Entry 4: The carnival will account the expense in the year in which the event occurs.ie in June 2020.
Entry will be as follows:
Date	Particulars	Debit Amount	Credit Amount
		$	$
Jun-20	Performance Expense	52000
	Advance for Performance		52000
	(Advance amount paid to Lady Antebellum in January 2019 for the performance in June 2020)
Chart of accounts for your reference:
1.Kerrie Collins Account	The same can be treated as either Current liabilities or sundry creditors.
2.Revenue from bookings	Revenue Account
3.Advance for Performance	The same will be treated as current assets at the year end in balancesheet
4.Performance Expense	Expense Account
NOTES:
The Advance receipts is always recogonised in the year in which the sale or service is completed.
The advance payment is always treated as current assets in the books.