Henry Falk subscribes to an online monthly gardening magazine and selects the option of a three-year subscription from the following options:

One issue .................................€ 12

Twelve issues ............................€120

Twenty-four issues .......................€200

Thirty-six issues ..........................€300

The publisher, English Magazine Specialties plc, estimates that it will cost €60, €62 and €64 per annum respectively to supply the magazines for the respective years.

Henry duly pays by credit card as part of the subscribing process.

Show the entries in the books of the English Magazine Specialties plc.

Required:

(a) Show the entries to record the transactions associated with the sale and supply for years one, two and three. (Ignore interest for part a.)

(b) Assuming a 10% borrowing rate and a constant revenue stream show the accounting entries. Use 2% for credit card fees.

(c) Provide the disclosures which would need to be made in the annual report at the end of the first year of the contract.

(d) What other patterns of revenue recognition could be used?