Question

Posa Hotels, Inc.,.has a sixth night free policy. Every sixth night a guest stays at the hotel is free. Because not all guests stay enough nights to earn a free stay, on average the number of free nights redeemed is 70% ofthe maximum possible number offree nights available one obtains by dividing the total number of paid nights the hotel has had by 5. Rooms at Posa Hotels cost $300 per night In 2019, Posa had a total of 100,000 paid room-nights and collected a total of $30 million from customers. Also in 2019, customers redeemed a total of 10,000 free room-nights. Some of the room-nights awarded were based on customers paid nights from previous years and some were based on paid nights from the current year. Required Prepare journal entries to record revenue for 2019 for Posa. (If no entry is required for a particuler transaction, select "No journal entry required" in the first account field. Do not round intermediate calculetions. Round your answers to the nearest whole dollar amount.) View transaction list Journal entry worksheet Prepare the entry to record the revenue recognized for the nights paid by Note: Enter debits before credits. Transaction General Journal Debit Credit

Answer 1

Answer:

Explanation:

1.

Dr Cash 30,000,000

    Cr Gift liability 4,200,000

    Cr Sales revenue 25,800,000

2.

Dr Gift liablity 3,000,000

    Cr Sales revenue 3,000,000

[redemption of free nights]

Calculations:

Percentage of one free night redeemed over total paid nights = 14%[70%/5]

Revenue earned in 2019 = 30,000,000

Gift liability in 2019 = 4,200,000 [14%*30,000,000]

Sales revenue = 25,800,000[30,000,000 - 4,200,000]

Number of free nights redeemed = 10,000

Liability decrease due to redemption of free nights = 3 million [10,000*300]