Reference no: EM132952772

Assume B&F offers a deal whereby enrolling in a new membership for P700 provides a year of unlimited access to facilities and also entitles the member to receive a voucher redeemable for 25% off yoga classes for one year. The yoga classes are offered to gym members as well as to the general public. A new membership normally sells for P720, and a one-year enrollment in yoga classes sells for an additional P500.

B&F estimates that approximately 40% of the vouchers will be redeemed. B&F offers a 10% discount on all one-year enrollments in classes as part of its normal promotion strategy.

Problem 1: How many performance obligations are included in the new member deal?

a. 0

b. 2

c. 1

d. 3

Problem 2: How much of the contract price would be allocated to each performance obligation (stand-alone selling price of yoga discount voucher and gym membership, respectively)?

a. P 0; P750

b. P750; P 0

c. P30; P720

d. P 28; P672

Problem 3: The journal entry to recognize sale of a new membership. Clearly identify revenue or deferred revenue associated with each performance obligation:

a. Cash 700

Deferred revenue - membership fees 672

Deferred revenue - yoga option 28

b. Cash 700

Deferred revenue - membership fees 700

c. Cash 700

Deferred revenue - yoga option 700

d. Cash 700

Revenue - membership fees 672

Revenue - yoga option 28