The following is an except from a conversation between Monte Trask and Jamie Palk just before they boarded a flight to Berlin on American Airlines. They are going to Berlin to attend their company's annual sales conference.

Monte: Jamie, aren't you taking an introductory accounting course at college?

Jamie: Yes, I decided it's about time I learned something about accounting. You know, our annual bonuses are based on the sales figures that come from the accounting department.

Monte: I guess I never really thought about it.

Jamie: You should think about it! Last year, I placed a $900,000 order on December 27. But when I got my bonus, the $900,000 sale wasn't included. They said it didn't ship until January 5, so it would have to count in next year's bonus.

Monte: A real bummer!

Jamie: Right! I was counting on that bonus including the $900,000 sale.

Monte: Did you complain?

Jamie: Yes, but it didn't do any good. Sophia, the head accountant, said something about matching revenues and expenses. Also, something about not recording revenues until the sale is final.

I figured I'd take the accounting course and find out whether she's just jerking me around.

Monte: I never really thought about it. When do you think American Airlines will record its revenues from this flight?

Jamie: Hmmm, I guess it could record the revenue when it sells the ticket ... or when the boarding passes are taken at the door ..or when we get off the plane ... or when our company pays for the tickets ... or I don't know. I'll ask my accounting instructor.

Discuss when American Airlines should recognize the revenue from ticket sales to properly match revenues and expenses.

Case 3-1 Accrued revenue The following is an excerpt from a conversation between Monte Trask and Jamie Palk just before they boarded a flight to Berlin on American Airlines. They are going to Berlin to attend their company's annual sales conference. Monte: Jamie, aren't you taking an introductory accounting course at college? Jamie: Yes, I decided it's about time I learned something about accounting. You know, our annual bonuses are based on the sales figures that come from the accounting department. Monte: I guess I never really thought about it. Jamie: You should think about it! Last year, I placed a $900,000 order on December 27. But when I got my bonus, the $900,000 sale wasn't included. They said it didn't ship until January 5 , so it would have to count in next year's bonus. Monte: A real bummer! Jamie: Right! I was counting on that bonus including the $900,000 sale. Monte: Did you complain? Jamie: Yes, but it didn't do any good. Sophia, the head accountant, said something about matching revenues and expenses. Also, something about not recording revenues until the sale is final. I figured Id take the accounting course and find out whether she's just jerking me around. Monte: I never really thought about it. When do you think American Airlines will record its revenues from this flight? Jamie: Hmmm, I guess it could record the revenue when it sells the ticket ... or when the boarding passes are taken at the door .... or when we get off the plane .... or when our company pays for the tickets ... or I don't know. rll ask my accounting instructor. Discuss when American Airlines should recognize the revenue from ticket sales to properly match revenues and expenses