Fit & Slim (F&S) is a health club that offers membersvarious gym services.
Required:
1. Assume F&S offers a deal whereby enrollingin a new membership for $1,300 provides a year of unlimited accessto facilities and also entitles the member to receive a voucherredeemable for 20% off yoga classes for one year. The yoga classesare offered to gym members as well as to the general public. A newmembership normally sells for $1,470, and a one-year enrollment inyoga classes sells for an additional $750. F&S estimates thatapproximately 40% of the vouchers will be redeemed. F&S offersa 10% discount on all one-year enrollments in classes as part ofits normal promotion strategy.
a. & b. Indicate below whether each item is aseparate performance obligation. For each separate performanceobligation you have indicated, allocate a portion of the contractprice.
c. Prepare the journal entry to recognize revenuefor the sale of a new membership.
2. Assume F&S offers a “Fit 60” coupon bookwith 60 prepaid visits over the next year. F&S has learned thatFit 60 purchasers make an average of 50 visits before the couponbook expires. A customer purchases a Fit 60 book by paying $750 inadvance, and for any additional visits over 60 during the yearafter the book is purchased, the customer can pay a $15 visitationfee per visit. F&S typically charges $15 to nonmembers who usethe facilities for a single day.
a. & b. Indicate below whether each item is aseparate performance obligation. For each separate performanceobligation you have indicated, allocate a portion of the contractprice.
c. Prepare the journal entry to recognize revenuefor the sale of a new Fit 60 book.
Req 1A and 1B
Indicate below whether each item is a separate performanceobligation. For each separate performance obligation you haveindicated, allocate a portion of the contract price.
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| | Item Description | Performance Obligations? | | Stand Alone Prices | | Percentage of Total Stand AlonePrices | | Yoga discount voucher | | | | | | | Gym membership | | | | | | | Total stand alone price | | | | | | | | Item Description | Percentage of Total Stand AlonePrice | Total Transaction Price | | Allocated Contract Price | | Yoga discount voucher | | | | | | | Gym membership | | | | | | | Total contract price | | | | | |
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Req 1C
- Record the revenue for the sale of a new membership.
Note: Enter debits before credits.
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| | Transaction | General Journal | Debit | Credit |
|---|
| 1 | | | | | | | | | | | | | | | | | | | | | | | |
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Indicate below whether each item is a separate performanceobligation. For each separate performance obligation you haveindicated, allocate a portion of the contract price.
Req 2A and 2B
- Record the revenue for the sale of a new Fit 60 book.
Note: Enter debits before credits.
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| | Item description | Performance Obligations? | | Stand Alone Prices | | Percentage of Total Stand AlonePrices | | Fit 60 | | | | | | | Additional gym visits | | | | | | | Total stand alone price | | | | | | | | Item description | Percentage of Total Stand AlonePrice | Total Transaction Price | | Allocated Contract Price | | Fit 60 | | | | | | | Additional gym visits | | | | | | | Total contract price | | | | | |
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Record the revenue for the sale of a new Fit 60 book.
Note: Enter debits before credits.
Req 2C
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| | Transaction | General Journal | Debit | Credit |
|---|
| 1 | | | | | | | | | | | | | | | | | | | | | | | |
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