Edmonton Health Club (EHC) is a public company that operates five (5) health facilities in Edmonton and offers one-year memberships. Membership gives members access to all the health & fitness centres The health & fitness centres have free weights, strength training equipment, cardio equipment, and have a variety of aerobic classes offered throughout the day. The members may use any of the five health & fitness centres including the aerobic classes as part of their membership fees As an incentive, EHC advertised that any customers who are not satisfied for any reason can receive a refund of the remaining portion of their unused membership fees. Membership fees are due at the beginning of the individual membership period, however, customers have the option of financing their membership fee over the membership period at an interest rate of 8% (the current market rate) In the past, some customers have said they would like to take only the regularly scheduled aerobic classes and not pay for the full membership. During the current fiscal year, EHC began selling coupon books for aerobic classes only to accommodate these customers. Each book is dated and contains 52 coupons (in essence, one for each week) that may be redeemed for any regularly scheduled aerobics class over a one-year period. After the one-year period, unused coupons are no longer valid. In 2017, EHC had expanded into the health equipment market by purchasing a local company that manufactures elliptical machines and treadmills. These machines are used in EHC's facilities and are sold through the clubs and online. Customers make a 20% down payment when placing an equipment order. Delivery is usually 3-5 days after an order is placed. The remaining payment is either made on delivery or through a 'no payment, no interest for 1 vear' plan which would be due one year after delivery. The machines are sold with a one-year warranty EHC is in the process of preparing financial statements as at November 30, 2018, the end of its fiscal year. The President has been in discussion with the newly hired CFO who has expressed concen over how the different revenue streams are being recognized in the financial statements The President believes (and the current year financial statements reflect) EHC is in the process of preparing financial statements as at November 30, 2018, the end of its fiscal year. The President has been in discussion with the newly hired CFO who has expressed concen over how the different revenue streams are being recognized in the financial statements The President believes (and the current year financial statements reflect) 1. Membership revenue is recognized when the membership fee is sold (i.e. dr cash or 2. Ifa member is paying on the monthly payment plan the monthly cash payment is 3. Revenue from the coupon books is recognized when the books are sold (i.e. dr cash cr 4. Down payments on equipment purchases is recognized when they are paid (and a accounts receivable S500 cr revenue S500) recorded as dr cash cr accounts receivable, cr interest revenue revenue) corresponding 20% recognition of the COGS) (ie. dr cash $300 cr revenue $300 and dr COGS S140 cr Inventory S140) The remaining amount on the purchase is recognized when the equipment is delivered (and a corresponding remaining recognition of COGS) (i.e. dr cash or accounts receivable S1,200 cr revenue S1,200, dr COGS S560 cr revenue S560) 5. 6. Ifa machine is purchased through the no payment, no interest for 1 year'plan the cash payment, a year from the date of sale, is recorded as dr cash cr accounts receivable. 7. Expenses associated with the warranty on the elliptical machines are recognized when any expenses are paid. Based on sales history, the costs of repairing machines under warranty is usually approximately 4% of the sales of the machines. So no entry until repairs are made and the entry at that time would be dr warranty expenses, cr cash or accounts payable. Additional information Memberships can be purchased anytime during the year. They run from date of purchase for one year. Assume a one year membership is $500 per year. The membership fee is either paid fully up-front or in equal monthly payments of $43.21 (due at the beginning of each month) Coupon books can be purchased anytime during the year. They run from date of purchase for one year. Assume a coupon book is S$160 per year. Coupon books are paid in full at time of purchase. Assume a standard elliptical has a cost of $700 and is retailed (sold) for S1,500. . Required: The CFO has hired you, a revenue recognition consultant, to provide a detailed report outlining how EHC's different revenue streams and amounts should be reported. Please prepare a report to the CFO providing this information. Your report should have a summary of your conclusions for each revenue stream and details on how you reached those conclusions