Question:
Fit & Slim is a health club that offers members various gym services. F&S accounts reports.
Required:
1. Assume F&S offers a deal whereby enrolling in a new membership also entitles the member to receive
a voucher redeemable for 25 percent off a year’s worth of premium yoga classes. A new membership
costs $800, and a year’s worth of premium yoga costs an additional $600. F&S estimates that
approximately
40 percent of the vouchers will be redeemed. F&S offers a 10 percent discount on all courses as part of its
seasonal promotion strategy.
a. Identify the separate performance obligations in the new member deal.
b. Allocate the contract price to the separate performance obligations.
c. Prepare the journal entry to recognize revenue for the sale of a new membership. Clearly identify
revenue or unearned revenue associated with each distinct performance obligation.
2. Assume F&S offers a “Fit 50” coupon book with 50 prepaid visits over the next year. F&S has learned
that Fit 50 purchasers make an average of 40 visits before the coupon book expires. A customer purchases
a Fit 50 book by paying $500 in advance, and for any additional visit over 50 during the year after the
book is purchased, the customer can pay a $15 visitation fee. Depending on the season, F&S typically
charges between $12 and $18 to nonmembers who wish to work out on a single day.
a. Identify the separate performance obligations in the Fit 50 member deal.
b. Allocate the contract price to the separate performance obligations.
c. Prepare the journal entry to recognize revenue for the sale of a new Fit 50 book. When will F&S
recognize revenue associated with people using its Fit 50 plans?
Answer:
Fit & Slim is a health club that offers members various gym services. F&S accounts reports.
Required:
1. Assume F&S offers a deal whereby enrolling in a new membership also entitles the member to receive
a voucher redeemable for 25 percent off a year’s worth of premium yoga classes. A new membership
costs $800, and a year’s worth of premium yoga costs an additional $600. F&S estimates that
approximately
40 percent of the vouchers will be redeemed. F&S offers a 10 percent discount on all courses as part of its
seasonal promotion strategy.
a. Identify the separate performance obligations in the new member deal.
b. Allocate the contract price to the separate performance obligations.
c. Prepare the journal entry to recognize revenue for the sale of a new membership. Clearly identify
revenue or unearned revenue associated with each distinct performance obligation.
2. Assume F&S offers a “Fit 50” coupon book with 50 prepaid visits over the next year. F&S has learned
that Fit 50 purchasers make an average of 40 visits before the coupon book expires. A customer purchases
a Fit 50 book by paying $500 in advance, and for any additional visit over 50 during the year after the
book is purchased, the customer can pay a $15 visitation fee. Depending on the season, F&S typically
charges between $12 and $18 to nonmembers who wish to work out on a single day.
a. Identify the separate performance obligations in the Fit 50 member deal.
b. Allocate the contract price to the separate performance obligations.
c. Prepare the journal entry to recognize revenue for the sale of a new Fit 50 book. When will F&S
recognize revenue associated with people using its Fit 50 plans?
Answer:
