The following disclosures are from the August 30, 2009, annual report of Costco
ID: 2774846 • Letter: T
Question
The following disclosures are from the August 30, 2009, annual report of Costco Wholesale Corporation.
Revenue Recognition: We generally recognize sales, net of estimated returns, at the time the member takes possession of merchandise or receives services. When we collect payment from customers prior to the transfer of ownership of merchandise or the performance of services, the amount received is generally recorded as deferred revenue on the consolidated balance sheets until the sale or service is completed. Membership fee revenue represents annual membership fees paid by our members. We account for membership fee revenue, net of estimated refunds, on a deferred basis, whereby revenue is recognized ratably over the one-year membership period.
The components of the deferred tax assets and liabilities are as follows (in $ millions):
$ 152
Balance Sheet
Income Statement
Revenue($ millions) 52 weeks ended
August 30, 2009 52 weeks ended
August 31, 2008 52 weeks ended
September 2, 2007 Net Sales $69,889 $70,977 $63,088 Membership fees 1,533 1,506 1,313 Total revenue $ 71,422 $ 72,483 $ 64,401
Explanation / Answer
Cash that Costco received during 2009 for membership fees.
Total cash received (in $ millions) = Ending Balance deferred Membership fee + membership revenue recongnized(2008) - beginning balance deferred membership fee
Total cash received (in $ millions) = $824 + $1533 - $748= $1609
Dr. Cash 1609
Cr. Unearned Revenue 1609
Dr. Unearned Revenue 1533
Cr. Revenue 1533
Balance Sheet Income Statement
Cash Asset + Noncash Assets = Liabilities + Cont Capital + Earned Capital Revenues – Expenses = Net Income
$1,609 + $0 = $1,609 + $0 + $0 $0 - $0 = $0
$0 + $0 = -$1,533 + $0 + $1,533 $1533 - $0 = $1533
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