Accounting Treatment for Entrance Fee paid

[Yuannie]

Hi... I need accounting help for the following situation:-

A company is paying an $30,000 entrance fee for a club membership, which gives the company a lifetime rights to use the club facilities (no expiration). On top of the entrance fee, the company also pays $400 monthly subscription fee.

How should the company account for the $30,000 entrance fee in its book? The entrance fee seems to be of a capitalized nature, i.e. an intangible asset, since the company is paying the fee to buy the lifetime rights to use the facilities.

Hence, should it be treated as a subscription costs in the current period, or capitalized as an intangible asset?

Should it is an intangible asset, how will it be amortised?

Thank you

 

[kirby]

Typically, the club membership fee is recorded as an asset that does not amortize. You need to read the membership agreement to find out if this is the case. If the membership agreement says the fee is non-refundable then amortize. But typically it says you can re-sell the membership. So, again, you need to read the agreement (or ask the boss if you think management will no tlet you read the agreement.)