Barnes and Noble Member programs entitles the Member to receive a 10% discount on all purchases made (20% discount for adult hardcover books) during the twelve month period. The annual fee of $25.00 is nonrefundable after 30 days. Revenue is being recognized over the 12 month period based on historical spending patterns for Barnes and Noble Members. Refunds adn fees due to cancellations within the first 30 days are minimal.
a. Explain in laymans terms how Barnes and Noble accounts for cash received for its membership program. When does Barnes and Noble record revenue from this program?
b. How does Barnes and Noble's balance sheet reflect those membership fees?
c. Does the 10% discount affect Barnes & Nobles income statement when membership fees are received?