Reference no: EM132473288

Air Manitoba Inc. offers a customer loyalty program that grants members award miles for each flight taken. Members can redeem the air miles which expire 10 years after issuance, for future flights. Members must redeem 15,000 air miles to obtain a return flight within the province of Manitoba under the reward program (short-range flight) and 25,000 miles to fly elsewhere in Canada (medium-range flight).

Other facts relating to 2021 revenues and 2021 air miles awards are as follows:

Point 1: Air Manitoba's experience has been that 50% of the award flights taken are short-haul flights;

Point 2: In 2021, Air Manitoba received $8,000,000 cash in flight-related revenue for flights taken in 2021;

Point 3: Air Manitoba expects that 75% of the 8,000,000 air miles awarded in 2021 will be redeemed prior to their expiry;

Point 4: The performance obligation pertaining to the 2021 air miles is estimated to be $90,000; During 2022, 60 short-range award flights and 60 medium-range award flights were claimed; During 2023, 75 short-range award flights and 75 medium-range award flights were claimed.

Required:

Question a) Prepare journal entries needed to record flight related activity for Air Manitoba in 2021.

Question b) Prepare journal entries needed to recognize award revenue in 2022 and 2023.