Travis Dorso-Decision Case 3-3

Travis Dorso-Decision Case 3-3 - 3. In this particular...

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GB518: Financial Accounting Principles and Analysis Chapter 1- Accounting as a Form of Communication (Decision Case 3.3 – Reading and Interpreting Southwest Airlines’ Balance Sheet) Travis Dorso GB518- Unit 2 Decision Case Professor Wendy W. Achilles, PhD, CPA 1. The economic events that caused the air traffic liability for Southwest Airlines are the sales of tickets to the customers as well as any exchanges or refunds. This event would be classified as an external event because it involves an interaction between the entity and its environment. 2. This is unearned revenue and cannot be consider as passenger revenues until the actually transportation is provided. As payments are obtained by passengers, the cash account is increased and unearned revenue is increased which is the makeup of “air traffic liability”, a liability account that Southwest Airlines created.
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Unformatted text preview: 3. In this particular transaction, the $500 dollars used by the customer to purchase the ticket in advance would be debited to the cash account and also credited to the air traffic liability account. When the revenue is earned by transporting the passenger, the air traffic liability account is decreased and the revenues are increased. 4. The only economic event that may occur and cause Southwest Airlines to reduce its air traffic liability when transportation is actually provided. This event would be concluded as an internal event because in this instance, what provides the transportation are the planes and the planes are equipments used....
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This note was uploaded on 01/26/2012 for the course BUSINESS Accounting taught by Professor N/a during the Spring '11 term at Kaplan University.

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