Answer Happy

Analyzing Unearned Revenue Disclosures The following disclosures are from the September 1, 2013, annual report of Costco Wholesale Corporation Revenue Recognition: Membership fee revenue represents annual membership fees paid by substantially all of the Company's members. The Company accounts for membership fee revenue, net of estimated refunds, on a deferred basis, whereby revenue is recognized ratably over the one-year membership period Revenue (5 millions) September 1, 2013 September 2, 2012 August 28, 2011 Net Sales $102.870 397,062 187,048 Membership fees 2.025 1867 Total revenue 2.286 $105.156 $ 99,137 $8.915 Current Liabilities (5 millions) September 1, 2013 September 2, 2012 Accounts payable $7,872 17.303 Aconued salaries and benefits 2037 1,832 710 661 382 397 1,167 1.009 $13,257 Accrued member rewards Accrued sales and other takes Deferred membership fees Other current abilities Total current liabilibes 29 Dashboard 1,101 964 $12,250 Wendy Yate (a) Which of the following statements best explains in layman terms how Costco accounts for the cash received for its membership fees? Because Costco does not know how many of its members will continue to the end of the year, cash received from members is recorded as a liability and recognized as revenue only at year-end. When it receives cash, the company records it as a current liability. Then, it recognizes revenue evenly over the year. The company records revenue when the cash is received Because Costco has a refund policy, the company records revenue when the cash is received, less an allowance for expected membership terminations G
Support Dashboard Wendy Yates- The company records revenue when the cash is received. Because Costco has a refund policy, the company records revenue when the cash is received, less an allowance for expected membership terminations (b) Use the balance sheet information on Costco's Deferred Membership Fees liability account and its income statement revenues related to Membership Fees earned during 2013 to compute the cash that Costco received during 2013 for membership fees. Total cash received (in 5 millions) - $ (c) Use the financial statement effects template to show the effect of the cash Costco received during 2013 for membership fees and the recognition of membership fees revenue for 2013 Use negative signs with your answers, when appropriate Transaction (5 millions) Cash received for membership fees Membership fees earned Check Balance Sheet Income Statement Cash Asset Noncash Assets Liabilities Contributed Capital Earned Capital Revenue Expenses Net Income