Assume the same facts as in question 142, except that $2 million in earned travel awards on ALA expired during 2009. What is the expense that ALA should report for its frequent flyer program in its 2009 income statement?
A)$38 million
B)$40 million
C)$42 million
D)None of these is correct.This is 80% of the $50 million cost of free travel awards earned.

Question

Quizplus · Accepted Answer

The cost of free travel awards earned is still $50 million, but $2 million of it expired in 2009. Therefore, the expense that ALA should report for its frequent flyer program in its 2009 income statement is $40 million ($50 million - $2 million = $48 million, which is 80% of the total cost, so $48 million / 0.8 = $40 million).

Assume the Same Facts as in Question 142, Except That