Reference no: EM132478467

Fit & Slim (F&S) is a health club that offers members various gym services.

Required:

Point 1. Assume F&S offers a deal whereby enrolling in a new membership for $1,500 provides a year of unlimited access to facilities and also entitles the member to receive a voucher redeemable for 30% 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 $1,560, and a one-year enrollment in yoga classes sells for an additional $650. F&S estimates that approximately 50% of the vouchers will be redeemed. F&S offers a 10% discount on all one-year enrollments in classes as part of its normal promotion strategy.

Question a. & b. Indicate below whether each item is a separate performance obligation. For each separate performance obligation you have indicated, allocate a portion of the contract price.

Question c. Prepare the journal entry to recognize revenue for the sale of a new membership.

Point 2. Assume F&S offers a "Fit 70" coupon book with 70 prepaid visits over the next year. F&S has learned that Fit 70 purchasers make an average of 60 visits before the coupon book expires. A customer purchases a Fit 70 book by paying $650 in advance, and for any additional visits over 70 during the year after the book is purchased, the customer can pay a $15 visitation fee per visit. F&S typically charges $15 to nonmembers who use the facilities for a single day.

Question a. & b. Indicate below whether each item is a separate performance obligation. For each separate performance obligation you have indicated, allocate a portion of the contract price.

Question c. Prepare the journal entry to recognize revenue for the sale of a new Fit 70 book.