Cheeptravel.com sells ﬂights for various airlines and destinations over the internet and receives a 25 percent commission for tickets sold. Cheeptravel collects the full amount from the customer and remits the net amount after commission to the airline. Unsold tickets are returned to the airline after 90 days. During 20X6, Cheeptravel had the following information: 1. Total sales price of tickets sold during 20X6 was $2,000,000. 2. Total commissions retained by Cheeptravel during 20X6 for these tick ets was $500,000. 3. Total expenses incurred for web site maintenance for Cheeptravel was $1,000 per month. How much revenue should Cheeptravel report on its 20X6 income statement?
A) $500,000
B) $2,000,000
C) $1,500,000
D) $488,000

Question

Quizplus · Accepted Answer

Cheeptravel should report $500,000 as revenue, which represents the 25% commission it retains on ticket sales. The total sales price of tickets is not revenue for Cheeptravel, but rather the amount collected on behalf of the airlines.