Membership fee revenue represents annual membership fees

“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
($ millions)

September 1, 2013

September 2, 2012

August 28, 2011

Net Sales

$102,870

$97,062

$87,048

Membership fees

2,286

2,075

1,867

Total revenue

$
105,156

$
99,137

$
88,915

Current Liabilities
($ millions)

September 1, 2013

September 2, 2012

Accounts payable

$7,872

$7,303

Accrued salaries and benefits

2,037

1,832

Accrued member rewards

710

661

Accrued sales and other taxes

382

397

Deferred membership fees

1,167

1,101

Other current liabilities

1,089

966

Total current
liabilities

$
13,257

$
12,260

The components of the deferred tax assets (liabilities) are as follows (in $
millions):

2013

2012

Equity compensation

$
80

$
79

Deferred income/membership fees

130

148

Accrued liabilities and reserves

530

461

Other

Property and equipment

(558)

(522)

Merchandise inventories

(190)

(182)

Net deferred
tax assets

$
34

$
39

(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 $ millions) = $Answer

(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.

Balance Sheet

Transaction

Cash Asset

Noncash Assets

Liabilities

Contributed Capital

Earned Capital

Cash received for membership fees

Answer

Membership fees earned

Answer

Income Statement

Revenue

–

Expenses

Net Income

Answer

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
($ millions)September 1, 2013September 2, 2012August 28, 2011Net Sales$102,870$97,062$87,048Membership fees2,2862,0751,867 Total revenue$
105,156$
99,137$
88,915 Current Liabilities
($ millions)September 1, 2013September 2, 2012 Accounts payable$7,872$7,303Accrued salaries and benefits2,0371,832Accrued member rewards710661Accrued sales and other taxes382397Deferred membership fees1,1671,101Other current liabilities1,089966 Total current
liabilities$
13,257$
12,260

The components of the deferred tax assets (liabilities) are as follows (in $
millions): 2013 2012 Equity compensation$
80$
79Deferred income/membership fees130148Accrued liabilities and reserves530461Other4255Property and equipment(558)(522)Merchandise inventories(190)(182) Net deferred
tax assets$
34$
39 (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 $ millions) = $Answer

(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. Balance SheetTransactionCash Asset+Noncash Assets=Liabilities+Contributed Capital+Earned Capital Cash received for membership feesAnswer

Answer

Membership fees earnedAnswer

Answer

Income StatementRevenue-Expenses=Net IncomeAnswer

Answer

“

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