WestJet includes among its current liabilities $251,354,000 for “Advance ticket sales.”

Note 1

(d) provides some additional information about this account.

a. When does WestJet recognize its revenue?

b. What does Advance Ticket Sales represent?

c. Why is Advance Ticket Sales reported as a liability? Describe the circumstances that would give rise to an increase in this account.

d. What journal entry would be made to record an increase in advance ticket sales?
(Alternative approach: Use an accounting equation spreadsheet to record an increase in advance ticket sales.)

e. What circumstances would give rise to a decrease in advance ticket sales?

f. What journal entry would be made to record a decrease in advance ticket sales?
(Alternative approach: Use an accounting equation spreadsheet to record a decrease in advance ticket sales.)

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.