Consider the following independent situations:

1. An international health club sells lifetime memberships costing \($1,500\) which allow the purchaser unlimited use of any of the club’s 300 facilities around the world. The initiation fee may be paid in 36 monthly installments, with a two percent interest charge on any unpaid balance.

2. Global Motors, Inc., has always offered a limited, 36-month warranty on its cars and trucks, but to counter the significant competition in the industry, the company has come to the conclusion that it must do something more. With that in mind, the company developed a new warranty program: For a \($1,500\) payment at the time of purchase, a customer can buy a seven-year warranty that will cover replacement of almost all parts and labor. The purchased warranty expires at the end of seven years or when the customer sells the vehicle, whichever occurs first.

3. Arcadia Promotions Inc. sells coupon books that give the holder a ten percent discount at any of 50 participating merchants. The buyer of the coupon book pays \($25\) for the book but can realize up to \($500\) in savings. Arcadia convinces merchants to participate in the program at no cost, arguing that participation will build customer traffic and will create the opportunity for repeat business from the coupon book-holders.

4. Luxury Furniture Inc. sells household furniture under installment purchase contracts. The contracts usually carry interest rates of 16 percent or more a year. When the company accumulates \($500,000\) of contracts with at least a year or more to go, it sells the contracts to a finance company on a nonrecourse basis. Luxury Furniture continues to service the contracts and is paid a service fee. If a contract ‘is uncollectible, Luxury Furniture turns it over to a collection agency and has no further responsibility for it. In January, Luxury sold contracts with a face value of \($1\) million and received \($1.06\) million in cash from the finance company.

5. Community News, Inc., prints and distributes a weekly newspaper throughout the city. Local stores order a certain number of the papers each week and pay for them on delivery. Community News always takes back any unsold papers and gives the merchant a credit toward future purchases.
For each of these situations, describe the revenue recognition policy that you believe that the company should follow, explaining the basis for your recommendation.