Smith Brothers Outdoor Adventures: Proper revenue reporting
Bob and Tom Smith, owners of Smith Brothers Outdoor Adventures, are planning to add an outdoor adventure camp for children to the line of services they provide. Their plan includes requiring the parents to pay a non-refundable deposit of half the tuition fees to hold their child’s place in the camp. The remaining tuition can by paid using two options. Option 1 requires the remaining tuition to be paid upon the child’s arrival at camp. Option 2 allows the parents to spread the remaining one-half of the tuition over the total camp time, with payments due every other Friday. This option adds an additional fee of $100 to the tuition to offset the risk and the processing costs.
How should the deposits be recorded? How should the tuition fees be recorded under Option 1? Option 2? How should the additional $100 processing fees be recorded? What if the parents don’t make the biweekly payments? How should Bob and Tom record unpaid tuition fees?