7.

ACC, a professional body charges an annual fee of $600 for subscription to its publications. The $600 fee entitles customers to receive a copy of the latest version of the professional standards relevant to their industry (updated annually). Subscribers also receive monthly newsletters for the duration of the subscription period.

ACC should recognize the $600 as follows:

Select one:

a. Recognise the whole $600 as revenue at the end of the subscription period

b. Recognise the whole $600 as revenue upfront

c. Recognise revenue of $50 per month across the period of the annual subscription.

d. Recognise an amount upfront in relation to the copy of the professional standards, with the balance being recognised evenly across the period of the annual subscription.

8.

Big Bank Limited provides Good Sport Pty Ltd with a five-year loan to finance the construction of a new sporting stadium. Good Sport had the choice of paying a market rate of interest (7.5% at the inception of the loan) or paying interest at a rate of 1.5% below the market rate, and paying in addition a fixed arrangement fee of $200 000 to compensate Big Bank for charging an interest rate below the fair market value. Good Sport chose the second option. Big Bank should recognize revenue from the arrangement fee as:

Select one:

a. interest revenue on the completion of the significant act of drawing down the loan

b. interest revenue over the life of the loan in accordance with the effective interest method.

c. fee revenue as services are provided by Big Bank

d. fee revenue on the completion of the significant act of drawing down the loan