REVENUE RECOGNITION Each of the following situations relates to the recognition of revenue:

a. A store sells a gift card in December which will be given as a Christmas present. The card is not redeemed until January.

b. A furniture store sells furniture in June with no payments and no interest for six months.

c. An airline sells an airline ticket in February (and collects the fare in February) for a flight in March to a spring break destination.

d. A theme park sells a season pass which allows entrance into the park for an entire year.

e. A package delivery service delivers a package in October but doesn’t bill the customer and receive payment until November.

Required:

For each situation, indicate when the company should recognize revenue.

Exercise