100% satisfaction guarantee Immediately available after payment Both online and in PDF No strings attached
Previously searched by you
Solution Manual for Intermediate Accounting Volume 2 8th Edition Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod-Dick, Kayla Tomulka, Romi-Lee Sevel Chapter 12-22 A+$14.99
Add to cart
Solution Manual for Intermediate Accounting Volume 2 8th Edition Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod-Dick, Kayla Tomulka, Romi-Lee Sevel Chapter 12-22 A+
Solution Manual for Intermediate Accounting Volume 2 8th Edition Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod-Dick, Kayla Tomulka, Romi-Lee Sevel Chapter 12-22
Solution Manual for
Intermediate Accounting Volume 2 8 th Edition Thomas H. Beechy, Joan E.
Conrod, Elizabeth Farrell, Ingrid McLeod-Dick, Kayla Tomulka, Romi-Lee Sevel
Chapter 12-22
Case 12-1 (LO12.3, LO12.5, LO12.6)
Winter Fun Incorporated
To: Members of Board of Directors
From: Accounting Consultant
RE: Winter Fun Incorporated
Overview
Winter Fun Incorporated (WFI) uses IFRS for financial reporting. The bank loan has a
minimum current ratio so you will need to be careful and watch for any impacts on the
ratio. You have had a tough year this year and faced a loss so the bank financing is critical
to your operations.
Following the 5 step IFRS model:
Initiation fee
Step 1: The contract with the customer is for the membership in the club. This would be a
written agreement between the member and WFI.
Step 2: There is one performance obligation, the promised service is membership in the
ski club. There is no transfer of the service until the membership is provided.
Step 3: The contract price is $10,000. The non-refundable deposit is an advance payment
towards this initiation fee and is part of the overall transaction price.
Step 4: No allocation since there is only one performance obligation.
Step 5: The performance obligation for the initiation fee is satisfied over the period of
time that the member belongs to the club. The $10,000 would be recognized over the
average period a member belongs. There should be enough historical data available to
come up with a reasonable estimate. There would be no cash collection risk since the
amount is paid upfront.
Annual fee
Step 1: The annual fee is a written agreement between the member and WFI.
Step 2: There is again one performance obligation, the service for this year.
Step 3: The fee of $2,000 is the total contract price and is received in 20X5 for the 20X6
ski season. This would be unearned revenue when received.
Step 4: There is no allocation since there is only one performance obligation.
Step 5: Assuming the ski season goes from Dec 1 until March 31 $500 would be
recognized in 20X5 and the remainder in 20X6 which would be the period in which the
service is performed. There would be no cash collection risk since the amount is paid
upfront.
2. Revenue recognition guests
Following the 5 step IFRS model:
Step 1: The contract with the guest is the written contract when they receive the ticket to
ski, not when the reservation is made since this reservation could be cancelled.
, Step 2: The performance obligation is the right to ski that day.
Step 3: The overall contract price is the price of the ski ticket.
Step 4: There is no allocation since there is only one performance obligation.
Step 5: The performance would be the right to ski on that day. There is no cash collection
risk since the guest pays by credit card when they purchase the ticket.
3. Special promotions
Following the 5 step IFRS model:
Step 1: The contract with the customer is the written contract when they receive the ticket
and the right to a future lesson.
Step 2: There are two separate performance obligations the right to ski and the right to the
lesson.
Step 3: The total contract price is $100.
Step 4: This price would need to be allocated to the two separate performance obligations
based on their relative fair value.
Fair value ski pass 80 = 61.5% x 100 = $61.50
Fair value lesson 50 = 38.5% x 100 = $38.50
Total fair value 130
Step 5: The $61.50 allocated to the performance obligation for the ski pass would be
satisfied on the day that they ski. For the $38.50, the performance obligation would be
satisfied on the day they take the lesson. There would be no cash collection risk assuming
a credit card is used to purchase the special pass.
4. Coupons
It must be determined if an economic loss would occur for the coupons. The coupons are
for $5 and the price of a ski pass is $80. This is a minor amount compared to the price of
the ski pass so WFI would still be selling the ski pass at a profit. Therefore, the coupons
should only be recognized as a cost when they are redeemed.
5. Manufacturer Loan
The manufacturer of the ski lift has provided a 0% interest loan. This is often referred to
as a dealer loan. The loan is either measured in FVTPL or other liabilities. Most liabilities
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller ASolution. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $14.99. You're not tied to anything after your purchase.
