6.6. Arena Advertising Burger Bills, a national fast-food restaurant, purchases advertising rights to advertise in-ice during hockey games at Jensen Arena. Recall that Jensen Arena is still owned by

6.6.  Arena Advertising Burger Bills, a national fast-food restaurant, purchases advertising rights to advertise in-ice during hockey games at Jensen Arena. Recall that Jensen Arena is still owned by the town of Springfield. In exchange for $60,000 per season, Burger Bills’ logo will be displayed in the center ice for all games held at the Arena for 2 consecutive seasons. Burger Bills must pay for these rights at the beginning of each season. Four logos are displayed in the center ice at any given time, and Burger Bills’ logo will be displayed per the contract in the upper-right location. a. How should Burger Bills account for these advertising rights? b. How should Jensen Arena account for the advertising rights? c. Still responding from Jensen Arena’s perspective, now assume that Burger Bills was also granted 2 club-level seats to each game during the season (20 games), for both years of the contract. Purchased without advertising rights, these seats have a face value of $2,500 each, per season. Describe how this affects the recognition of Jensen Arena’s revenue

Respond to the following in complete sentences and cite your source. If you have to make any assumptions in your response, state what you assumed. Responses should primarily come from the Codification, unless otherwise noted.

Scope Exercises

1. Does the Research and Development—Overall topic within the Codification apply to activities that are unique to entities in the extractive industries, such as exploration? Explain or cite from the relevant paragraph.

  2. Does the Income Taxes topic apply to an entity’s operations that are accounted for under the equity method? Explain.

 3. Within the scope section of ASC 815-10 (Derivatives), which guidance comes first—the definition of a derivative, or scope exceptions to this topic? Explain.

 4. What is an example of a transaction that does not qualify as a lease (and is thus excluded from the scope of lease accounting)? 

 5. Which entities are subject to Earnings Per Share guidance within the Codification?

 6. Is environmental contamination incurred in the normal operation of a long-lived asset within the scope of the Codification’s Environmental Obligations guidance? 

7. A company has entered into a forward contract for the purchase of gold, in 2 years, for $1300/oz. Does this arrangement meet the definition of a derivative? Analyze all required parts of the definition. (You may simply refer to the guidance excerpts included within this chapter to respond.) 8. Name three examples of organizations that are within the scope of