On January 2,20X6,the Exeter Golf and Country Club Was Formed

question 20

Essay

On January 2,20X6,the Exeter Golf and Country Club was formed and registered as a non-profit organization.In May 20X6,the Club purchased a golf course near Exeter for $5,000,000.The purchase price was financed with an 8% mortgage loan of $4,500,000 and $500,000 contributed by the founding members.The mortgage was repayable over 25 years.The $500,000 contribution from the founding members was an interest-free loan repayable over 5 years.
The Club and vendor of the golf course agreed that the $5,000,000 purchase price would be split as follows:
The land improvement costs include the costs of developing the golf course.Experts in the field estimate that major costs are incurred approximately every 25 years to redevelop a golf course.
During 20X6,the membership fees were established for the Club as follows:
The initiation fee entitles the member to lifetime membership in the Club and to a vote at the annual general meeting.The Club hopes to sell 400 of these lifetime memberships over the next 2 years in order to pay off the existing loans and provide $3,000,000 for development of a clubhouse.The annual course fee is due by April 1 of each year.It entitles the member to golf at the Club throughout the year.If the member pays the annual course fee prior to January 31,the fee is reduced to $950.It is expected that 60% of the members will take advantage of the early payment discount.
The Club's president has approached you asking for assistance in establishing the accounting policies for the Club for its yearly financial statements.
Required:
Assume that the Club has decided to amortize the land improvement costs over 25 years,the clubhouse over 40 years,and to use the deferral method of accounting for contributions.Provide recommendations with supporting arguments for the accounting treatment of the initiation fees and annual fees.

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Definitions:

Rationality

The quality of being based on or in accordance with reason or logic.

Colonialism

The practice of acquiring full or partial political control over another country, occupying it with settlers, and exploiting it economically.

Geopolitical Position

The strategic importance of a country or region as determined by its geographic location in relation to political power, resources, and conflicts.

Social Structure

The organized pattern of social relationships and social institutions that together compose society.