Individual Research Paper

Binh  Duong

Acct 325

Professor  Kunkel

Date: 11/9/15

Individual Research Paper

1/ Super Electronics' source of revenue are electronic products, electronics installation, and repair services. Super Electronics is a regional retailer of electronic products include consumer electronics, home office products, entertainment software, appliances, and related services.
2/ Super Electronics should account for its membership fees as revenue. According to ASC 606-10-05-4(e), when customers obtain  control of the goods or services, this means that the company satisfies its performance obligation to the customer, and this also means  revenue is recognized. For Super Electronics, when the customers  obtain the right to be announced of special sales, product coupons and invitations to shopping events, this means that the company satisfies its performance obligation to the customers. Thus, the company’s revenue (the membership fee) is recognized. According to ASC 606-10-25-27(a), when a company transfers its goods or  services to its customers over time, so the revenue is also recognized over time. As for Super Electronics, the company will announce the membership customers the special sales, product coupons, and invitation to shopping events over a period of a year. Thus, the revenue of the membership fee is recognized over time.

3/ In the fiscal year 2008, the membership fees that the company should recognized is $7,200,000.

(25,000 memberships * 12 months * $24 membership price = $7,200,000)

4/ Cash         7,200,000

        Revenue (Membership fee)                7,200,000

5/ According to ASC 606-10-55-51, when a non-refundable upfront  fee relates to an activity that does not result in the transfer of a promised goods or service to the customer, the upfront fee is an advance payment for future goods or services.  Thus, it will be recognized as revenue when the future goods or services are sold. As for Super Electronics, the membership fee relates  to the announcement of special sales, product coupons and invitations to shopping events, and these activities don’t result in the transfer of a promised goods and  services. Therefore, the membership fee will be considered as revenue when the future goods or services are provided. This means that the answer in question 2 will not change.

6/ According to ASC 606-10-05-4(e), a revenue (sales) is recognized when a performance obligation is satisfied. For the membership fee, when the company announces the customers of special sales, product coupons and invitations to shopping events, the company satisfies its performance obligation to the customers. Thus, the membership fee is recognized as a revenue and should be included in sales.

7/ According to ASC 606-10-55-41, customers have options to obtain additional goods or services for free or at a discount. And this can be in forms of  sales incentives, customer award credits (or points), contract renewal options, or other discounts on future goods or services. Thus, the points issued, redeemed, and expired under the Customer Loyalty Program is a form of customer award credits (or points), and this is an exercise of the customers’ options to obtain additional goods or services for free.

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