Southwest Airlines is paid in advance for its ticket sales, recognizing a deferred revenue, called air traffic
Question:
Southwest Airlines is paid in advance for its ticket sales, recognizing a deferred revenue, called air traffic liability, when it receives the cash. The liability is then converted to revenue when the passenger takes the flight. During 2015, Southwest recognized passenger revenues in the amount of $19.8 billion. On the balance sheet Southwest reported air traffic liabilities of $2,990 million and $2,897 million as of the end of 2015 and 2014, respectively.
a. Explain why Southwest does not recognize revenue when it receives the payment from its customers.
b. What kind of a liability is air traffic liability? Discuss whether it should be considered current or long term.
c. Compute the cash received by Southwest from passengers during 2015.
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Step by Step Answer:
a Southwest Airlines does not recognize revenue when the cash is received because the ...View the full answer
