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RESEARCH CASE 3: RECOGNITION CASESPART ONE: Winston Diamond Jewelry purchased the naming rights for the baseball stadium where the Cranford Raptors play. The stadium is owned by the City of Cranford,...

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PART ONE: Winston Diamond Jewelry purchased the naming rights for the baseball stadium where the Cranford Raptors play. The stadium is owned by the City of Cranford, which sold the 10-year rights for $2 million per year. The contract gives Winston the right to display its name and logo throughout the inside of the stadium, including above the scoreboard and along the wall of the main entrance to the stadium. The name Winston Arena will be mounted on the exterior of the stadium. Prepare a memo for the Mayor and City Council of Cranford documenting the accounting for the naming rights agreement. Cite authoritative guidance. Then, include your two naming rights deals (shown below) as examples in the memo. For each, identify the contract and any terms, identify the performance obligations, determine the transaction price, allocate the transaction price, and discuss the revenue recognition according to the terms. The naming rights organizations are public companies. Use disclosures included in 10-Ks and news stories in the business to find the information. Include links to the information in your memo.

Team 5: Wells Fargo Center and Lincoln Financial Field (Philadelphia)

one issue below to address.

Team 5:, a website that offers sports betting, signs an agreement with Winston Stadium giving the company the right to run betting kiosks in the parking lots for 3 years. GameDay began constructing kiosks and an office hut for its own use in January of Year 1. During year 1, GameDay incurred interest of $500,000 on specific construction debt, and $200,000 on other borrowings. Interest computed on the weighted-average amount of accumulated expenditures for the building during year 1 was $400,000. Cole Hardy, the CFO of GameDay, wants to know whether the interest should be capitalized. Write a memo to Cole outlining accounting for capitalized interest. Explain how the accounting changes if all the interest is on specific construction debt or if all is on other borrowings. Cite authoritative guidance.

Answered 2 days After May 15, 2023


Nitish Lath answered on May 18 2023
6 Votes
Subject: Analysis of revenue recognition and capitalization of bo
owing cost
The detailed analysis of revenue recognition and capitalization criteria are as below:
Part 1
In the case, Winston Diamond Jewely purchase naming rights for 10 years by paying $2million per year and the rights has been sold by City of Cranford. As per ASC 606 criteria, there are uniform criteria for revenue recognition and five steps needs to recognized revenue. The entity should recognize the revenue if the contract is identifiable with customers, the contractual obligations are also identifiable, the amount of consideration is measurable, the transaction price can be allocated contractual obligations and the performance obligations are satisfied then the revenue can be recognized. In the case, the amount to be paid by Winston is fixed per year i.e. $2 million i
espective of advertisement given by third party and there is no other condition attached to amount of receipt (Alicia Tuovila, 2022). Thus, all five criteria of revenue recognition...

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