Read note 1(k) to WestJet’s financial statements, which note explains how WestJet accounts for “Deferred Costs.”

a. Where on WestJet’s balance sheet are the deferred costs reported?

b. What amount of deferred costs is reported on WestJet’s December 31, 2008 balance sheet?

c. What are the deferred costs?

d. WestJet’s treatment of the deferred costs can be considered an application of the matching principal. Explain.

e. What journal entry would WestJet make to record the deferred costs? (Alternative approach: Use an accounting equation spreadsheet to record the entry WestJet would make to record the deferred costs.)

f. What journal entry would WestJet make when it was time to expense the deferred costs? (Alternative approach: Use an accounting equation spreadsheet to record the entry WestJet would make when it was time to expense the deferred costs.

WestJet Airlines Ltd. (WestJet) was founded in 1996 by a team of Calgary entrepreneurs, headed by Clive Beddoe, as a Western Canadian regional carrier with three aircraft flying to five cities. Today, WestJet is Canada’s leading high-value low-fare airline, offering scheduled service to 66 destinations in Canada, the United States, Mexico, and the Caribbean, with its fleet of 81 Boeing Next-
Generation 737-series aircraft. WestJet is traded on the TSX under the symbols WJA and WJA.A.
WestJet’s consolidated balance sheets, statements of earnings and comprehensive income, and retained earnings along with some extracts from the notes to the financial statements, are provided in Exhibit 3-1.