Question

Costco wholesale corporation collects annual non-refundable membership fees from customers. when should costco recognize revenue for these membership fees?

Answer 1

Under the revenue recognition principle, revenue should only be recognized after it has been earned. This means that the service being rendered should be completed. Thus, the membership fees should be recognized at the end of the year, once the annual membership has passed. At this point, the service has been provided. Until then, the membership fees can be recorded as a liability.