Response to the following problem:
The following is an excerpt from a conversation between Nathan Cisneros and Sonya Lucas just before they boarded a flight to Paris on American Airlines. They are going to Paris to attend their company's annual sales conference.
Nathan: Sonya, aren't you taking an introductory accounting course at college?
Sonya: Yes, I decided it's about time I learned something about accounting. You know, our annual bonuses are based upon the sales figures that come from the accounting department. Nathan: I guess I never really thought about it.
Sonya: You should think about it! Last year, I placed a $300,000 order on December 23. But when I got my bonus, the $300,000 sale wasn't included. They said it hadn't been shipped until January 5, so it would have to count in next year's bonus. Nathan: A real bummer!
Sonya: Right! I was counting on that bonus including the $300,000 sale. Nathan: Did you complain? Sonya: Yes, but it didn't do any good. Beth, the head accountant, said something about matching revenues and expenses. Also, something about not recording revenues until the sale is final. I figure I'd take the accounting course and find out whether she's just jerking me around. Nathan: I never really thought about it.
When do you think American Airlines will record its revenues from this flight? Sonya: Mmm . . . I guess it could record the revenue when it sells the ticket . . . or . . . when the boarding passes are taken at the door . . . or . . . when we get off the plane . . . or when our company pays for the tickets . . . or . . . I don't know. I'll ask my accounting instructor.
Discuss when American Airlines should recognize the revenue from ticket sales to properly match revenues and expenses.