Agency Revenue Questions
Question 1: ABC Hotel Group, a customer of Expédia, wants to run an online advertising campaign for $75,000 from January 1 – March 31, 2020. The customer requests one invoice for the full $75,000 when the campaign begins on January 1st. Expedia’s policy is to recognize revenue in the period(s) advertising campaigns run in. In addition, the campaign runs evenly throughout the 3-month period. The customer pays the invoice on February 28th. Using the chart-of-accounts below, please create the journal entries listed below and show your calculations (you may use Excel, or please show calculations as applicable).
Chart-of-Accounts
100000-Cash
105000 – Accounts Receivable 205000 – Accounts Payable 215000 – Deferred Revenue 415000 – Revenue 715000 – Advertising Expense
1. What is the journal entry(s) that occurs when the invoice gets issued to the customer in January?
2. What is the journal entry(s) in February?
3. What is the journal entry(s) in March?
Question 2: Media Solutions (MeSo) is the department at Expédia that manages online advertising contracts and campaigns with our customers. They have Account Managers who work with our advertising clients to design and implement advertising campaign. XYZ Airlines, an advertising customer of Expédia, e-mails MeSo and asks if they can run an online advertising campaign in January 2020, but really want the invoice and revenue to be recognized in December 2019 to meet their 2019 budget. MeSo forwards you that same e-mail, since you are the advertising subject matter expert and accountant, and asks you if “this is something we can do to accommodate our customer?” Draft a response e-mail to MeSo to answer their question.