In: Accounting
This question comprises four parts. Each part covers the topic
of revenue recognition and is independent...
This question comprises four parts. Each part covers the topic
of revenue recognition and is independent of each other part.
Answer all questions to all four parts.
PART A:
The Royal Horseshoe Yacht Club (RHYC) is an association of
members that offers a number of services including community and
friendship among members, sailing courses for its members, meals in
its upscale restaurant, moorage for boats at its home port of
Horseshoe Bay, and moorage at outstations which are port facilities
outside of Horseshoe Bay. Access to the club facilities, including
the club restaurant, is available to members only.
RHYC is a highly sought-after yacht club and, therefore, few
members quit once accepted into membership, resulting in members
remaining in the club for an average of 25 years. RHYC follows IFRS
and has a December 31 year end. To fund the services it provides,
the club charges several fees as follows:
- A one-time initiation fee of $50,000. This fee is
non-refundable and is valid for as long as the member continues to
be a member in good standing.
- An annual membership fee of $10,000 due on January 1 each year,
which is valid for the calendar year. This annual membership fee
gives each member full access to the use of all of the club’s
facilities. In addition, under the annual membership fee, a member
will receive a credit of $2,400 towards restaurant meals in its
upscale restaurant. This credit of $2,400 is a reasonable
indication of the fair value of the meals for each year for a
member.
- Fees for moorage at the home port of Horseshoe Bay is based
upon market rates according to the size of the boat. Fees for
moorage at outstation facilities outside of Horseshoe Bay, however,
are included in the annual membership fee.
- Fees for sailing courses that are periodically offered to
members vary with each course.
Required: (Be specific in your
answers)
- Explain how and when RHYC should recognize and revenue from the
$50,000 one-time initiation fee using IFRS standards.
- Explain how and when RHYC should recognize revenue from the
$10,000 annual membership fee using IFRS standards.
- Explain how and when RHYC should recognize revenue from the
sailing courses and the moorage services at Horseshoe Bay using
IFRS standards.