Okay so I need help Identifying the reporting issues in this case with references to the conceptual framework pyramid, such as revenue recognition, full disclosure, historical cost, etc.
So this gym offers one year memberships.
Members can use any of the facilities but must pay a separate fee to use the court.
If members are unsatisfied they receive a refund for the remaining portion of their unused memberships.
Member fees are due at the beginning of the year
Can also finance membership over the year at 12%
Some customers want to only take an aerobic class but want to still pay the membership fee.
Gym starts selling coupon books for these classes. Each book has 25 coupons that can be redeemed for the aerobic at any time within the year. An unused coupons after the one year period are no longer valid.
Gym decides to sell rowing machines online. Customers have to make a 20% down payment when placing the order and its delivered 60 days after the order has been placed. The machines are sold with a two year guarantee. Expected costs for the machines under the guarantee to be 5% of sales.
So yeah any help would be greatly appreciated. I Know there's a lot of issues with revenue recognition but i cant really see anything beyond that. Please help. No calculation are needed for this assignment I just need to know items frim the conseputal framework applies here. PLEASE HELP
To identify the reporting issues in this case with references to the conceptual framework pyramid, let's analyze the given information and apply the relevant concepts.
1. Revenue Recognition:
- The gym offers one-year memberships, and members pay fees at the beginning of the year. As per the revenue recognition principle, the revenue from these memberships should be recognized over the membership period, not immediately upon receipt of payment.
- The gym also sells coupon books for aerobic classes. The revenue from the sale of these coupon books should be recognized when the coupons are redeemed, as this represents the transfer of the service to the customer.
2. Full Disclosure:
- The gym offers separate facilities with additional charges to use the court. The disclosure of these separate fees and charges should be clearly communicated to the members to ensure transparency.
- The gym provides refunds for the remaining portion of unused memberships. The policy and conditions for these refunds should be disclosed to users.
3. Historical Cost:
- The gym starts selling rowing machines online. Based on the given information, it is not clear whether the gym accounts for the rowing machines at historical cost or at fair value. This aspect needs clarification and consideration based on accounting principles.
Other considerations:
- Financing memberships at 12% interest raises questions about the appropriate recognition and disclosure of interest income related to these financed memberships.
- The expected 5% cost of sales under the guarantee for the rowing machines should be properly accounted for to ensure appropriate recognition of expenses and liabilities.
Keep in mind that a comprehensive analysis may require further information, and it is always recommended to consult the relevant accounting standards and guidelines.