Question:
Alpine West, Inc., operates a downhill ski area near Lake Tahoe, California. An all-day, adult ticket can
be purchased for $55. Adult customers also can purchase a season pass that entitles the pass holder to ski
any day during the season, which typically runs from December 1 through April 30. The season pass is
nontransferable, and the $450 price is nonrefundable. Alpine expects its season pass holders to use their
passes equally throughout the season.
The company’s fiscal year ends on December 31.
On November 6, 2013, Jake Lawson purchased a season ticket.
Required:
1. When should Alpine West recognize revenue from the sale of its season passes?
2. Prepare the appropriate journal entries that Alpine would record on November 6 and December 31.
3. What will be included in the 2013 income statement and 2013 balance sheet related to the sale of the
season pass to Jake Lawson?
Answer:
Requirement 1
Alpine West should recognize revenue over the ski season on an anticipated usage basis, in this
case equally throughout the season. The fact that the $450 price is nonrefundable is not relevant to the
revenue recognition decision. Revenue should be recognized as it is earned, in this case as the services are
provided during the ski season.
Requirement 2
Alpine West, Inc., operates a downhill ski area near Lake Tahoe, California. An all-day, adult ticket can
be purchased for $55. Adult customers also can purchase a season pass that entitles the pass holder to ski
any day during the season, which typically runs from December 1 through April 30. The season pass is
nontransferable, and the $450 price is nonrefundable. Alpine expects its season pass holders to use their
passes equally throughout the season.
The company’s fiscal year ends on December 31.
On November 6, 2013, Jake Lawson purchased a season ticket.
Required:
1. When should Alpine West recognize revenue from the sale of its season passes?
2. Prepare the appropriate journal entries that Alpine would record on November 6 and December 31.
3. What will be included in the 2013 income statement and 2013 balance sheet related to the sale of the
season pass to Jake Lawson?
Answer:
Requirement 1
Alpine West should recognize revenue over the ski season on an anticipated usage basis, in this
case equally throughout the season. The fact that the $450 price is nonrefundable is not relevant to the
revenue recognition decision. Revenue should be recognized as it is earned, in this case as the services are
provided during the ski season.
Requirement 2
