The new revenue recognition standard issue by the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) will call for major changes in the way companies in the airline industry recognize revenue. Airlines may have to change how they account for loyalty status benefits, mileage credits, change fees, and breakage for tickets that expire unused. The American Institute of Certified Public Accountants (AICPA) has formed an airlines task force to address implementation issues of the new standard for the airline industry. Assume that you have been called upon to present an analysis of the impact of the new standard on Southwest Airlines.

Refer to Southwest’s (ticker symbol: LUV) current/most recent financial statements (10-K) and the accompanying notes to answer the following questions. The current/most recent financial statement can be found on https://www.sec.gov/edgar/searchedgar/companysearch.html. Search for the company in the ‘Fast Search’ box by using the ticker symbol provided above. In the list of results, find the latest filing labeled 10-K and select the ‘Documents’ link. On the next page, select the document of type ’10-K’ to open it.

1. For each of the following revenue categories, describe the current accounting, the likely changes (if any) that the new revenue recognition standard will require, and the potential impact of those changes on patterns of revenue recognition.

a) Flight Transportation (for tickets used and for ticket breakage)

b) Loyalty Program

c) Ancillary Services and Other Revenue

1. Which of the following expenditure cycle activities can be eliminated through the use of IT or reengineering?
   1. ordering goods
   2. receiving goods
   3. approving vendor invoices
   4. cash disbursements
2. Which   of   the   following   revenue   cycle   activities   can   potentially   be eliminated by technology?
   1. sales order entry
   2. shipping
   3. cash collections
   4. billing
3. Which of the following matches is performed in evaluated receipt settlement (ERS)?

1. the vendor invoice with the receiving report
2. the purchase order with the receiving report
3. the vendor invoice with the purchase order
4. the vendor invoice, the receiving report, and the purchase order

4. Which of the following provides a means both to improve the efficiency of processing customer payments and also to enhance control over those payments?
   1. lockboxes
   2. CRM
   3. aging accounts receivable
   4. EDI
5. Which document is used to establish a contract for the purchase of goods or services from a supplier?
   1. vendor invoice
   2. purchase requisition
   3. purchase order
   4. disbursement voucher
6. Which activity is part of the sales order entry process?
   1. setting customer credit limits
   2. preparing a bill of lading
   3. checking customer credit
   4. approving sales returns

7. What is the best control procedure to prevent paying the same invoice twice?
   1. Segregate check-preparation and check-signing functions.
   2. Prepare checks only for invoices that have been matched to receiving reports and purchase orders.
   3. Cancel all supporting documents when the check is signed.
   4. Require two signatures on all checks above a certain limit.
8. Which document often accompanies merchandise shipped to a customer?
   1. picking ticket
   2. sales order
   3. credit memo
   4. packing slip
9. It is difficult to prevent fraudulent billing for services. One of the most effective techniques is for the function to periodically conduct detailed reviews of contracts for services.
   1. CPA firms
   2. internal audit
   3. internal control
   4. accounts payable
10. The applicable control procedure for the threat of incomplete or inaccurate customer orders is:
    1. data entry edit checks
    2. segregation of duties
    3. data entry edit controls
    4. reconciliation of sales order with the picking ticket
11. The applicable control procedure for the threat of Uncollectible accounts in revenue cycle is:
    1. Aging of accounts receivable
    2. Credit limits

d. Specific authorization to approve sales to new customers

c. all of the above

12. Which document is used to establish a contract for the purchase of goods or services from a supplier?
    1. vendor invoice
    2. purchase order
    3. purchase requisition
    4. disbursement voucher
13. The following is(are) a red flag(s) that would identify suppliers likely to represent potential problems:
    1. The supplier’s address is on the invoices.
    2. Entertainment expenses are high in terms of a percentage of the supplier’s gross sales.
    3. A large percentage of the supplier’s gross sales was to one company.
    4. A and B
    5. B and C

14. The document used to request that an item be ordered is the
    1. purchase order
    2. purchase requisition
    3. purchase advice
    4. purchase auction
15. The following lists the quantity and description of each item included in the shipment:
    1. picketing ticket
    2. bill of lading
    3. sales order
    4. packing slip
16. The   applicable   control   procedure    for   the   threat   of   incomplete   or inaccurate customer orders is:
    1. credit limits
    2. segregation of duties

d. data entry edit controls

c. reconciliation of sales order with the picking ticket

Suppose that Company A had three paying consumers in the month of April 2016. The customer journey of these three consumers and the respective revenue from the sale is presented in the table below.

Assume that the company uses the time decay attribution model to ascertain revenue sharing across the digital marketing channels. The time decay is set up such that the channel closest to the sale is given and attribution of 50%, followed by 30%, 15% and 5% attributed respectively to channels preceding it in decreasing order of closeness to sale as shown in the table below:

A. For the scenario depicted in the document the share of revenue for Paid Search channel is ... a. $190 b. $210 c. $180 d. $200

B. For the scenario depicted in the document which channel gets the highest share of revenue?....a. direct b. paid search ad C. organic D. email

C. IF the company had employed a linear attribution model the share of revenue for direct channel would have been: A. $158 b. $206.25 c. $190.25 d. $190

D. For the scenario depicted in the document which channel gets the lowest share of the revenue? a. Organic b. Direct c. Paid Search Ad d. Email

Prepare your case analysis in an MS PowerPoint presentation.

The new revenue recognition standard issued by the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) will call for major changes in the way companies in the airline industry recognize revenue. Airlines may have to change how they account for loyalty status benefits, mileage credits, change fees, and breakage for tickets that expire unused. The American Institute of Certified Public Accountants (AICPA) has formed an airlines task force to address implementation issues of the new standard for the airline industry. Assume that you have been called upon to present an analysis of the impact of the new standard on JetBlue. Refer to JetBlue’s (ticker symbol: JBLU) current/most recent financial statements (10-K) and the accompanying notes to answer the following questions. The current/most recent financial statement can be found on https://www.sec.gov/edgar/searchedgar/companysearch.html. Search for the company in the ‘Fast Search’ box by using the ticker symbol provided above. In the list of results, find the latest filing labeled 10-K and select the ‘Documents’ link. On the next page, select the document of type ’10-K’ to open it. Provide an overview of JetBlue’s current fare structures and revenue sources. For each of the following revenue categories, describe the current accounting, the likely changes (if any) that the new revenue recognition standard will require, and the potential impact of those changes on patterns of revenue recognition. Flight Transportation (for tickets used and for ticket breakage) Loyalty Program Ancillary Services and Other Revenue Identify any areas that will require more discretion and judgment and specify why.

Indicate the effect each account has on retained earnings. (increase, decrease, or no effect)

a)advertising expense

b)Service revenue

c) Insurance expense

d) Salaries & Wages Expense

e) Dividends

f) Rent revenue

g) Utilities Expense

Rank in order of liquidity:

Accounts Payable
Bonds Payable
Deferred Revenue
Depreciation Expense

Discount on bonds payable

Insurance Expense
Interest Expense
Rent Expense
Salaries and Wages Expense
Salaries and Wages Payable
Service Revenue
Supplies Expense

A perfectly competitive firm's marginal cost curve above the average variable cost curve is its:

Select one:

a. total revenue curve.

b. short-run supply curve.

c. input demand curve.

d. marginal revenue curve.

Company expects revenue of $1 million in year 1, $1.2 million in year 2, and amounts increasing by $200,000 per year thereafter. If the company’s MARR is 5% per year, what is the future worth of the revenue through the end of year 10?

X Company's profit equation next year is expected to be 0.42R-$11,900, where R is total revenue. Assuming a tax rate of 34%, what must next year's revenue be in order for X Company to earn after-tax profits of $28,000?