When does Carnival Cruise Lines recognize revenues and expenses for its cruises?

carnival-cruise-shipCarnival Cruise Lines had a record-breaking month in January 2014 in terms of number of net bookings (new bookings less cancellations.) During January 2014, Carnival booked more than 565,000 (net) guests for cruises to be taken over the next two years.

Part of the reason that Carnival may be seeing increased bookings is its new LIVE concert series which features performances by many top artists, including Jennifer Hudson, Gavin DeGraw, Lady Antebellum, Daughtry, Martina McBride, Jewel, and others.

Questions

  1. Assume that on January 10, 2014, Kerrie Collins booked a four-day cruise for June 2015 to Western Caribbean for a total of $1,958 (not including taxes, fees, or port expenses.) The customer pays in full on the day she books. What journal entry will Carnival make on January 10, 2014, for the Kerrie Collins booking and payment?
  2. When (what month/year) does Carnival recognize the revenue from Kerrie Collins’ cruise? What journal entry would Carnival make when it recognizes the revenue from Kerrie Collins’ cruise?
  3. Now assume that Carnival booked Lady Antebellum in January 2014 to perform on the June 2015 Western Caribbean cruise.  Further assume that Carnival pays Lady Antebellum its entire performance fee of $52,000 on January 15, 2014, for the June 2015 cruise. What journal entry will Carnival make on January 15, 2014, for its payment to Lady Antebellum?
  4. When (what month/year) would Carnival expense the payment to Lady Antebellum? What journal entry would Carnival make when it recognizes the Lady Antebellum expense?

Instructor Resources

These resources are provided to give the instructor flexibility for use of Accounting in the Headlines articles in the classroom. The blog posting itself can be assigned via a link to this site OR by distributing the student handout below.  Alternatively, the PowerPoint file below contains a bullet point overview of the article and the discussion questions.  The YouTube video link below is a narration of the blog post article (no discussion questions are included in the YouTube video; those can be assigned separately.)

  • Student handout (pdf) (word) (contains entire blog posting + discussion questions)
  • PowerPoint file (brief article overview + discussion questions)
  • YouTube video (narrated article in shareable YouTube link)

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 3.0 Unported License.

About Dr. Wendy Tietz, CPA, CMA, CGMA

Dr. Wendy Tietz is a professor of accounting at Kent State University in Kent, Ohio, USA. She is also a textbook author with Pearson Prentice-Hall.

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